What is a cryptocurrency "whale"?
Definition:
In the cryptocurrency market, a whale is a person or entity that holds a large amount of a crypto asset (such as BTC, ETH, SOL, etc.). Due to the enormous size of their assets, any purchase or sale can affect the price of the entire market.
1. Typical sources of whales
Early investors: For example, individuals or organizations that bought a large amount of BTC and ETH before 2010 and became "giant whales" as prices surged.
Institutions/funds: Cryptocurrency hedge funds, venture capital institutions (like a16z, Pantera), corporate reserves (like MicroStrategy).
Treasury of the project/DAO part: For example, the governance treasury controlled by the Uniswap Foundation and the Arbitrum Foundation has large reserves of Tokens.
Exchanges: Centralized exchanges (like Binance, Coinbase) or custodians hold a large amount of client assets.
Market manipulators (whales): Use large amounts of funds for short-term manipulation, such as destabilizing the market to wash tokens, dragging the market to absorb tokens, and influencing retail behavior.
2. Patterns and logic of whale behavior
1) Large quantity purchases (attraction):
Buy millions or even hundreds of millions of dollars of a particular currency at once.
will drive the currency price up in a short period, triggering a technical buy signal.
Retail investors are prone to fear of missing out (FOMO) and follow their lead, generating a bullish trend.
2) Large-scale selling (Dumping):
Transfer a large amount of coins to the exchange platform and sell them gradually.
The price drops rapidly, triggering a chain of stop losses and panic selling.
3) On-chain transfer (implicit behavior):
It is not an immediate transaction, but its capital flow will be interpreted as "preparation for action."
Entry to the Exchange: → The market interprets it as "preparation for sale."
Exit from the Exchange: → Interpreted as "long-term holding," "liquidity reduction."
4) Price manipulation:
Use small currencies with low liquidity to manipulate prices (Pump & Dump).
Use the futures market for long/short trading and simultaneously influence spot prices, achieving a beneficial situation for all.
3. Large-scale selling (Dumping):
Transfer a large amount of coins to the exchange platform and sell them gradually.
The price drops rapidly, triggering a chain of stop losses and panic selling.
4. Typical impact of whales on the market.
Whales continue to transfer assets: market sentiment is optimistic, whales are bullish, and coin prices could rise.
Whales continue transferring assets to exchange platforms: regarded as a "prelude to liquidation," the price of coins could experience a rapid correction or a short-term drop.
Whales build positions at low levels (lateral accumulation): overall market volatility is low, but on-chain data is active and there is a possibility of a breakout in the future.
Whales trade together: several whales create trends through consistent transactions, attracting retail investors to "take control" and wait for high points to sell.
5. The evolution of the role of whales in different stages of the market.
In the early stage of a bull market: build positions discreetly and buy in batches; do not make too much noise.
At the climax of a bull market: take advantage of market enthusiasm to push it, inducing retail investors to buy and gradually sell.
In the early stage of a bear market: flee quickly, transfer stablecoins, and coin prices plummet.
In the mid to late stages of a bear market: low-level design, long-term hoarding, and preparation for the next cycle.
In summary, how should we deal with whales?
1. Do not blindly chase the ups and downs: whales often use public opinion to reverse trades.
2. Pay attention to changes in on-chain capital flows, which sometimes send signals before the charts.
3. Use low leverage and prepare sufficient funds in the account to avoid being dragged by large fluctuations.
4. Observe the behavior of multiple whales instead of individual actions: occasional behavior does not represent a trend.
