What is a cryptocurrency whale?
What if everybody in the world had the same financial muscle? Life may not be as sweet. In the cryptocurrency world, those with a considerable amount of cryptocurrency in their wallets are called whales. A whale can be an individual, a group or an organization. In most cases, due to the large amounts of user funds cryptocurrency exchanges hold, they can be whales. However, since they cannot use the funds to trade, they have no effects on the virtual currency market.
Interestingly, there’s no clear line as to how much cryptocurrency a crypto investor needs to have in their wallet to be considered a whale. In the Bitcoin world, a whale can have at least 1K Bitcoins (BTC).
One measure of a whale is their capability to move the market with the coins they hold. Mostly, to prevent affecting the market, a cryptocurrency whale uses over the counter (OTC) trading.
Away from proof-of-work (PoW) cryptocurrency projects like BTC, whales also exist in proof-of-stake (PoS) platforms such as EOS. Here, whales are recognized by the voice they have on governance issues on the platform. For example, the more amount staked results to more voting power.
The smaller the market cap of the coin, the bigger the influence of a whale on the market.
Is the presence of whales a risk?
Yes, and no. In PoS systems, for example, a whale has all the reasons to act honestly. Still, when there are many of them, it leads to power centralization, ignoring small coin holders in decision making.
On PoW systems like Bitcoin, whales can negatively affect the coin’s price when they decide to sell their coins. If driven by malicious reasoning, they can buy back when the price falls, earning them more coins to become stronger whales.
Examples of Bitcoin whales include Fortress, Bitcoin Investment Trust, Pantera Capital, Binary Financial, and Global Advisors Bitcoin Investment Fund.