What Are Crypto Whales and Why Are They Important?

Crypto whales are some of the most influential entities in the crypto space. In fact, they are so important that individuals and tools track their activities to predict price movements. Bearing this in mind, let’s look at what crypto whales are and why they are critical components of the cryptoverse.

Simply put, crypto whales are individuals or organizations that own a large amount of a coin or non-fungible token (NFT) collection. The size of the holding has to be large enough to cause a ripple effect on the price of the coin or NFT if the holder sells it all at once.

For example, a bitcoin (BTC) whale is an entity that owns a large amount of bitcoin, usually a minimum of 1,000 BTC or $10 million and above. A holder could also be an ether (ETH) whale, another altcoin whale or an NFT whale.

The threshold of determining whether an altcoin holder is a whale or not depends on the market size of the coin in question. As such, although $10 million worth of BTC is the threshold for identifying bitcoin whales, the minimum requirement may be lower for altcoins, especially those with small market capitalization.

For example, the market cap of bitcoin at the time of writing this article is around $469 billion when you multiply its price (as of writing, $24,300) by its circulating supply (19.3 million BTC). Because bitcoin has the largest market cap, bitcoin investors need to hold a sizable amount of bitcoin in dollars to be considered whales.

Most other cryptos don’t come close to bitcoin’s market cap, so holders will need far less to be considered a whale. For example, Polygon’s MATIC has a $10 billion market cap while dogecoin (DOGE) is at $9.5 billion, so it would take under $1 million in either to qualify as a whale.

NFT whales are entities that own a large number of NFTs, ideally of the same collection, though often NFT whales own many high-value blue-chip NFTs such as Bored Apes, CryptoPunks, Moonbirds and others. A collector who owns a significant fraction of an NFT collection is an NFT whale. For instance, if a collection consists of 1,000 NFTs, an individual or organization that holds 50 of such NFTs would likely be considered a whale.

The sheer size of the holdings of crypto whales means they can influence price trends intentionally or unintentionally. When whales make big moves, they make waves. Let’s look at some of the ways they can cause price swings.

Before discussing the short-term price impact of crypto whales, it is vital to first understand crypto liquidity.

Simply put, liquidity is how easy it is to convert a coin to another cryptocurrency or fiat without experiencing a wild shift in price. When a trader enters a BTC buy or sell order on an exchange, the liquidity status of bitcoin on that exchange will determine how fast it is to match the order, and whether the price of the coin will remain stable.

If there is high liquidity, the exchange transaction will finalize quickly without causing the price to shift significantly. In a case where there is low liquidity, it will take a while to match the buy or sell order and, as a result, the price may shift before the finalization of the trade. Exchanges with high liquidity ensure that all sell and buy orders are matched promptly. In contrast, low liquidity occurs when there is an order matching delay due to deficiencies on either the sell or buy side of trades.

So how does this phenomenon tie into how crypto whales influence the digital asset market?

Like most average crypto holders, whales aim to make more money by increasing the value of their holdings. Because they have access to a large crypto holding, they can influence price trends momentarily by either flooding the crypto market with coins or initiating buying pressure. The two strategies with which crypto whales can cause short-term price swings are as follows:

In the two strategies highlighted above, the bitcoin whale invokes low liquidity in the BTC market and profits from the imbalance.

The activities of whales also denote a shift in crypto market cycles (that is, the recurrence of different stages of euphoria and fear resulting in long-term rise and fall of crypto prices). During a period of a sustained surge in crypto prices, whales often buy more coins to increase the size of their holdings. Once whales begin to sell off a fraction of their holdings, a market crash may be imminent.

The growing adoption of community-based governance anchored by tokens is another reason crypto whales are vital components of the crypto space. A typical decentralized system launches a governance token that distributes voting rights to holders. In most cases, wealthy investors buy up a large portion of these governance tokens to become major stakeholders in crypto projects. Because they own a significant fraction of the governance token, they can easily sway governance voting results in their favor. This is similar to how the votes of large shareholders significantly determine the results of corporate elections.

Bearing in mind the influence of crypto whales, it has become common for crypto participants to track whale activities to determine short-term and long-term price trends.

Crypto whale tracking is possible because the blockchain is a public ledger that documents activities and crypto balances of users. Anyone can track any blockchain wallet address and how much they hold. However, it should be noted it is only possible to determine the real-world identities of the owners of wallet addresses when they publicly reveal this information.

Nonetheless, it is not crucial to figure out the real-world identities of whales. The most important thing is how much the whale’s address holds, how often it moves and the destination of the funds. In particular, the destination wallet is critical information. Below is why:

To track all this information, enter the wallet address of the whale into a blockchain explorer. A blockchain explorer is a database where you can access on-chain historical data.

If manually tracking the activities of crypto whales seems like too much work, here are other ways to do it:

Note that crypto whales are aware that traders track their transactions. In the hopes of triggering price movements, they sometimes move coins around without eventually executing trades. So keep this in mind and only whale watch as one of many inputs to inform your trading decisions.