Cryptocurrencies and digital assets were essentially developed to level the playing field in financial markets. However, some individuals known as cryptocurrency whales still have more leverage and influence than others.

Who exactly is a crypto whale?

According to Binance Academy, a whale can be described as an individual or organization that holds a large amount of a particular cryptocurrency and has enough coins or tokens to cause a significant impact on market prices.  

Although there is no exact cutoff on the amount of crypto for this definition, BitcoinWiki believes that a whale is any entity holding at least 1,000 BTC. As shown below, different classifications of investors depend on how much BTC they hold. 

Image credit to BitcoinWiki Blog Post

Why are crypto whales important?

The value of cryptocurrencies is mainly driven by supply and demand. If whales remove a considerable fraction of a coin’s quantity from circulation, the result is a surge in the price of the coin. However, if the held coins suddenly flood the market, then the price of that particular coin will plummet. 

According to BitInfoChars, the ten largest BTC wallets account for 6% of all Bitcoin in circulation, while the top 100 wallets account for roughly 15% of all Bitcoin as of August 2021. As a result, all these wallets (whales) have the potential to manipulate cryptocurrency markets. They can choose to manipulate the market for their benefit or act per the crypto community to maintain the cryptocurrency market and network.

Who are some of the biggest cryptocurrency whales?

Unlike traditional bank account details, cryptocurrency addresses cannot be linked with their specific owners. Therefore, reverse engineering an address to know the owner is challenging, though not impossible. As such, we can group whales into four categories:

Exchanges

Crypto exchanges act as the main platforms where users actively trade their assets. As a result, these exchanges have steadily been increasing their crypto deposits, more so BTC, over the years, making them some of the largest centralized holders of BTC. They do so to increase liquidity and allow their users to trade. 

According to a 2021 report by CoinTelegraph, exchange wallets hold 6.3% of the total BTC. Some of these exchanges include Coinbase, Binance, Bitfinex and Okex, to mention a few.

Breakdown of BTC held on Exchanges

Image credit to a CoinTelegraph post

Institutions

Institutions are relatively new in the crypto space. They can be divided into two groups, for-profit companies like Micro-strategy and funds representing accredited investors such as digital asset management company Greyscale. 

Greyscale is one of the biggest holders of BTC, overseeing about $13 billion worth of Bitcoin, which is over 3% (643,572 BTC) of BTC’s market cap as of June 2022. On the other hand, Microstrategy holds 129,218 BTC, currently worth $2.7 billion and 0.62% of the Bitcoin in circulation. 

Individuals 

Some prominent individuals also got into Bitcoin early, when it was considered to be at a discount. The Winklevoss twins are believed to have purchased $11 million worth of Bitcoin when it was roughly $141 per coin. This would make their assets about 78,000 BTC, worth about $1.6 billion as of June 2022. Tim Draper, an American venture capitalist, also purchased 29,656 coins, representing roughly 0.15% of the total BTC in circulation, each at $632 at a U.S Marshal’s Service auction. As of June 2022, Draper’s BTC deposit is worth $618 million.

Satoshi Nakamoto

The pseudonymous creator of Bitcoin deserves his category. According to Sergio Demian, a Lead Cryptocurrency Researcher, Nakamoto may have mined over 1 million BTC between January and July 2009. However, no single wallet contains over 1 million BTC, but 63% of the first-ever mined BTC have never been spent. If this is accurate, Nakamoto’s fortune is worth over $20 billion today.

 What happens when crypto whales go to work?

Considering the significant amount of crypto assets whales hold, any large buy or sell will offset market prices. 

For instance, if five of the largest whales came together and decided to sell all their coins simultaneously, this would result in a catastrophic downtrend after the sale. The whale might then rebuy the coins at a significant discount when the price plummets. Due to the low crypto prices and their profit, whales might also buy more coins, giving them more control. While large sell orders can quickly drive the price down, large buy orders do the opposite. This is a highly abstract theory of how whales influence the market, but it certainly illustrates their power. 

How exactly do crypto whales transact?

picture with phone and btc

From the theory described above, whales have great control over the crypto market. However, most individuals and institutions avoid such transactions and large purchases, lest the price increase as they buy or plummet as they sell.

For instance, Microstrategy has stated that it deployed a “Macro buy strategy” to purchase over 20,000 BTC. This was executed on 88,617 smaller trades. The company traded for 74 continuous hours through small trades. Despite this strategy, the CEO, Michael Saylor, pointed out that they were ready to buy $30-50 million worth of BTC if the price dropped by 1% or 2%. 

Other than this strategy, whales use a few others to make transactions.

Over the Counter (OTC)

OTC transactions are off-exchange transactions that involve a bilateral contract between a high-end buyer and seller who agree on how to settle a future trade. Currently, there are several exchanges like Huobi and Binance that offer OTC desks to connect high-profile buyers and sellers. These deals are often private and include non-disclosure and non-circumvention agreements.  

Wallet to Wallet

OTC transactions are often executed on a wallet-to-wallet basis. Since they are private and do not require liquidity from an exchange, their effect on the crypto market is minimal. However, some platforms like Whale Alert, which flags whale transactions, might find these transactions and make them public. In such a case, the effect might be minimal in the short term since the intent of the whale is unknown. 

Exchange to Exchange

Most whales perform exchange to exchange transfers to benefit from arbitrage trading. This is when you buy a crypto asset at a lower price on one exchange and later sell it on another exchange for a higher profit. Since whales transact large amounts, the profit is also quite significant. This slight variation in prices in different exchanges usually does not worry day traders, and they do not react to such transactions. 

Wallet to Exchange and vice versa

As a crypto trader, these are probably the transaction to look out for when analyzing whale action. Due to the substantial liquidity exchanges provide, some whales prefer making their trades through exchanges. Any large BTC transfer from a wallet to an exchange usually coincides with a sell order or a trade. According to Glassnode’s on-chain analysis, such transactions from wallets with at least 1,000 BTC results to sell pressure. This is because most traders presume that whales are taking profits as they prepare for a crash or downtrend. 

The opposite is also accurate. Since non-custodial wallets offer whales more security, whales tend to transfer their assets from exchanges to wallets. These can be TrustWallet, Metamask or hardware wallets that provide more security. As a result, this removes a significant amount of BTC from circulation, reducing the supply, thus creating buy pressure that pushes the price up. 

Some of the best crypto whale tracker tools and resources

As a crypto trader or enthusiast, understanding and tracking whale transactions will put you many steps ahead of other investors and possibly help you save money. Here are a few tools you can use:

On-chain analysis using block explorers

Don’t be intimidated by the name. Block explorers are platforms that allow you to track transactions on a blockchain. For instance, Etherscan.io enables you to track all transactions on the Ethereum blockchain. Using this tool, you can spot large transfers and wallets that might cause market movements. 

Social Media Platforms

Social media platforms are probably one of the most straightforward tools to track whales. Social accounts like Whale Alert on Twitter keep people updated on any whale transaction, how much a whale transacts, and where the whale deposits BTC. 

cryptocurrency whales alert on Twitter

Crypto Whale charts

Whale chart platforms like Whalemap provide detailed charts and graphs on whale activity. Whalemap uses many factors such as trade volume, on-chain analysis, and Hodl waves to help you keep track of whale activity. On the other hand, the Whale Alert platform updates you on every significant transaction, almost every minute if not second.

block explorere  fro whale activity chart

Final thought

Due to the under-regulated nature of cryptocurrencies, whales have the power to manipulate the crypto market through buying or selling orders. Although these erratic price swings are short-term, the effect is often felt across the entire cryptocurrency market. However, as adoption and maturity take root in the cryptocurrency sector, and the prices rise, most crypto assets will shake off the influence of whales over the long run.