Understanding the concept of Bitcoin Whales

A visual representation of the digital Cryptocurrency, Bitcoin. Photo: AFP
A visual representation of the digital Cryptocurrency, Bitcoin. Photo: AFP

Bitcoin whale is a common phrase among cryptocurrency enthusiasts. Here is all you should know about the concept of Bitcoin whales. 

We hear multiple cryptocurrency communities throw around the phrase “crypto whales.” However, only a few people understand what Bitcoin whales are and their significance in the crypto market. The following article explains the concept of Bitcoin whales, including their impacts on liquidity, prices, and investors.

What is a Bitcoin Whale?

A Bitcoin or crypto whale is a phrase people use to refer to individuals or entities that hold vast amounts of cryptocurrency. Bitcoin whales have substantial portions of Bitcoin, giving them the power to influence the market. Although attaining a Bitcoin whale status is subjective in crypto, most crypto users agree that ownership of a large amount of circulating Bitcoin qualifies as a whale.

Individuals or entities with more extensive holdings of Bitcoin are referred to as whales because whales are much more extensive than other smaller fishes. For instance, four Bitcoin wallets owned 3.49% of all the Bitcoin in circulation as of May 2022. At the same time, the top 100 Bitcoin wallets had about 15.36% of all Bitcoin.

Bitcoin Whales’ Impacts on Liquidity 

Bitcoin whales can be a problem for the liquidity of Bitcoin since they boast high-profile crypto wallets and a concentration of wealth in the hands of a few entities. The problem’s magnification happens when the funds sit in those wallets unmoved for longer durations. Bitcoin whales can lower Bitcoin’s liquidity by holding on to vast amounts of wealth that do not circulate in the market. They strain the Bitcoin supply, leaving fewer coins that cannot meet the market demand. Do you want to buy or sell Bitcoin? If so, check out BITGPTAPP

How Bitcoin Whales Influence Prices

Apart from straining Bitcoin’s liquidity, Bitcoin whales can also drive price volatility, especially when they move large amounts of crypto in a single transaction. The lack of liquidity and more significant transaction sizes negatively affect Bitcoin’s prices if a whale attempts to sell their coins for fiat money. That is because other market participants also see those transactions and panic.

Whenever Bitcoin whales sell their assets, they create the impression that they are dumping their holdings. That puts other investors and the entire market on high alert. Crypto investors often watch the exchange inflow or the average amount of specific crypto users deposit into exchange platforms. An exchange inflow average of 2.0 and above suggests that whales will likely start dumping if the mean correlates to several whales using the platform.

Apart from the inflow mean, the publicity given to the transactions of a particular whale also influences price. Bitcoin prices mainly respond to transactions involving large amounts of crypto when announced publicly on social media.

The Significance of Bitcoin Whales to Investors 

An individual or entity with vast amounts of Bitcoin could move their holdings for various reasons. It is important to remember that the movement of holdings does not always mean that the whale is dumping their assets. It could be because they change their wallets, exchange platforms, or even make large purchases.

Sometimes, Bitcoin whales may sell their holdings in smaller amounts over an extended period to avoid unwarranted attention to their activities. They can also distort the markets, driving prices down or up unexpectedly. Investors usually watch the known Bitcoin whale addresses to stay informed on their activities.

Overall, crypto investors should pay keen attention to what Bitcoin whales are doing, owing to their significant impacts on liquidity and prices. However, movement does not always mean they are dumping, and you should panic. So, do your due diligence before making any moves that could be risky.




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