A very small number of investors hold a sizeable portion of BTC in the market. Less than 2,000 different wallets hold up to 40% of total Bitcoin. Whales are the most wealthy Bitcoin investors.

What are whales?

In the crypto-ocean, whales are the largest fish. To put it another way, whales are individuals (or groups) that possess substantial crypto holdings or who have the funds to make huge purchases. As a result, they can form buy-and-sell walls to control the market. Buying and selling volumes that the market cannot handle can be profitable if done correctly.

Whales have had a huge influence on the market throughout crypto history. Most whales prefer to remain hidden and operate “from the depths,” even though some whales and their behaviours have been recognized.

Essentials for Whales

Whales are individuals or organizations who hold enormous quantities of cryptocurrency.

With their enormous wealth, whales may manipulate the market.

Whales can purchase coins at cheap prices because of sell walls.

Buy walls compel investors to raise the price of the coin that a whale holds.

Whale Manipulation: Legal or Illegal?

First off, it should be noted that most regulated markets forbid manipulating the market with huge amounts of assets (often known as “whale manipulation”). Governments and regulatory authorities constantly monitor markets for suspicious behaviour and punish abusers. While a portion of the cryptocurrency market is still unregulated and vulnerable to incidents like these, a larger portion of the market has obtained a standard of regulation and compliance that matches, often even outperforms, traditional financial markets.

Despite everyone’s best efforts, whale manipulation is still a possibility in both traditional financial markets and cryptocurrency marketplaces. So, let’s look at how whales function to see what an investor should be aware of.

Blocking the market with a sell wall

Consider the possibility that a whale learns that cryptocurrency will soon be regulated, which might cause its price to skyrocket. They would like to acquire more of that coin, but it is too pricey at the moment. Hence, they can set up a sell wall to artificially lower the price of these coins because they already have a sizeable supply of them.

To accomplish this, the whale places a massive sell order, dumping a large number of coins onto the market at a price below the lowest price shown in the order book. Consequently, in order to sell any coins, everyone else will have to lower their asking price below the whale’s, or they won’t be able to do it at all.

The coin will subsequently be sold for much less than before if the sell wall persists. When the whale decides the price has been sufficiently dropped, they cancel their sell order and buy the cryptocurrency at the new lower price. Then, out of nowhere, the regulation enters into force, and everyone rushes to get their hands on that coin once more. The price rises as demand grows.

Pumping the price with a buy wall

There is always a bigger fish, and the huge ones have various tactics. A huge whale may choose the other path and make money by inflating the price, or even better, a group of whales could influence the market collectively. A buy wall is created when a whale or group of whales places massive purchase orders at prices above the market.

The price at which orders are executed is increased by these enormous buy orders, which also deceive other traders into raising their buying prices. Due to FOMO, or the fear of missing out on an easy profit, many individuals will start to buy the coin as prices start to rise. The excitement around the coin drives up its price. As their wealth increases, the whales HODL (keep, or hold, their assets) and cancel their buy orders before a sizeable portion has been executed.

To minimize slippage when selling their coins, they might also maintain their orders. The rapid shift in price brought on by an imbalance in buy and sell orders is known as slippage. Slippage would occur if a whale attempted to sell a large number of coins all at once, resulting in a lower average selling price than planned. To ensure that their coins are sold at a certain price, they must maintain a buy wall when selling.

Whales rarely surface

Whales frequently act like shoals of tiny fish. They distribute their riches among many accounts rather than operating as one big entity. When selling, they divide and divide their orders equally as they slowly accumulate a fortune. This makes their behaviours more difficult to detect and their identities more difficult to determine. That not only makes it easier for them to carry out their intentions, but it also protects them from legal action. After all,  the majority of regulated markets prohibit whale manipulation.

When making investing decisions, it is not advised to give too much importance to the size of orders in the order book to avoid whale manipulation. Whales, on the other hand, lose a lot of power when it comes to large cryptos: the greater the market, the fewer impact whales have over it. With such a huge market cap, even the mightiest whales will find it difficult to manipulate cryptocurrencies like BTC, ETH, and others.