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by Jamie Redman Jul 30, 2017

Bitcoin Whales and How They Make Market Waves

Sometimes when there’s a huge drop in bitcoin’s price traders called “bitcoin whales” are
blamed for dumping on the market. Bitcoin whales are individuals or groups who hold
vast quantities of bitcoins and can sometimes sway the market towards their preferential
price. These market movers have been around since the early days – ‘shaking out weak
hands’ many times over the years – but have also failed their missions at times as well.

Also read: Following Money Through the Bitcoin Laundry Is Not So Easy

What is a Bitcoin Whale?

If you trade bitcoins or altcoins, you’ve probably heard the term “whale” before as the
name is used to describe big cryptocurrency holders. The term is used this way because
whales are the biggest creatures in the ocean and they can overpower smaller fish with
their large size. Bitcoin whales are looked at similarly because their extensive holdings can
a ect large schools of smaller traders with just a few successful trading methods.
Additionally the smaller the market and less liquidity means whales can devastate smaller
altcoin markets way more easily than bitcoin. We also assume that Satoshi Nakamoto
may be the biggest whale of all as the creator allegedly owns 1 million bitcoins.

Rinse and Repeat

There are many trading maneuvers whales use to profit, like using
a trading tactic commonly called the ’rinse and repeat cycle.’
The rinse trade is used in many types of markets and can be
e ective if timed correctly and very profitable if you are a bitcoin
whale. The trader with a lot of holdings starts selling bitcoins
lower than the market rate which at times can cause a panic sell
o by small-time traders. The trick is the whale sold just below
the current market value and just enough to watch panic ensue.
Then the whale waits and watches the panic selling take place
until the bitcoin price reaches a new low. At this point, the whales quickly scoop up way
more bitcoins than they first started with and after the ‘rinse’ they usually ‘repeat’ this
type of trade often. People speculate that there are many ways whales can throw their
‘BTC weight’ around to either push the price up or down to accumulate more bitcoins.
Further, whales are not just individuals and can be an organization like a bitcoin
investment fund as well.

Utilizing Buy and Sell Walls

Whales in a sense don’t even have to trade their bitcoins to a ect
the market as they can also blu with buy and sell walls. In
cryptocurrency markets, exchanges use an order book to
facilitate trades where a buyer can set up an order to buy or sell
at a specified price other than the spot price. For instance, if the
market drops traders will usually buy at a lower bid and sell if the price reaches a higher
level. In order to place an order in the exchange’s order book, you have to legitimately
own enough funds to cover the order. This means a whale and even smaller traders in
many ways can blu and make it seem like a buy or sell walls exist. However, often times
large buy and sell walls disappear just before the price gets close enough because a big
player was just blu ng. Nevertheless many buy and sell walls are very real and can
change the odds rather quickly if they manage to liquidate someone’s assets.
 OTC Markets and Dark Pools
Sometimes whales don’t purchase or sell on traditional exchanges because their holdings
or orders could cause a stir in the market. For cryptocurrencies over the counter trading
(OTC) or “dark pools” is where big buyers and institutional traders can purchase vast
amounts of bitcoins without being seen by the public eye. Dark pools are similar to OTC
trading as they are usually found on exchanges that enable ‘o the record’ trades which
ensures a whale’s moves are more private. Typically OTC markets and dark pools only
allow traders who purchase an abundant amount of bitcoin at one time and set
minimums for entry.

The Infamous Bear Whale

Back in October of 2014, there was an event where a massive bitcoin whale liquidated
30,000 bitcoins for $300 a piece. Many traders and speculators thought it would wreck
the market at the time but instead, the order was ripped through by buyers and bitcoin’s
price subsequently rose to $375. The event was remembered forever, and the trader will
forever be known as the “bear whale.” The 30,000 BTC order was also recorded on video
alongside many memes and graphics depicting the epic slaying of this gigantic whale.
Many bitcoiners felt victorious that day in October because a whale of that size failed to
sway the market.

Whales Are Often Blamed for Big Market Shake Outs

Whales have been discussed in the bitcoin space for quite some time, and they are
usually blamed for unexplainable market phenomenon. Further, there are a lot of
conversations across bitcoin forums asking the question — How many bitcoins does it take
to be a whale? It seems the answer varies from 1,000 bitcoins to 10,000 bitcoins according
to multiple threads on Bitcointalk.org and Reddit. Many people believe that whales can
still a ect the market due to bitcoin’s relatively small market capitalization where multi-
million dollar orders can still shake things up. As bitcoin markets become stronger and
gain more liquidity, speculators believe it now takes bigger bitcoin whales to shift the
trading waters.

What do you think about bitcoin whales? Do you think large holders can still sway the
market? Let us know what you think in the comments below.

Images via Shutterstock, Pixabay, Bitstamp, and Christopher Steininger.

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TAGS IN THIS STORY

Bitcoin, Bitcoin Whales, Dark Pools, Early Adopters, Markets, N-Featured, Order Book, OTC, trading, WAVES, Whales

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