How Bitcoin whales make a splash in markets and move prices

Deriving their names from the size of the massive mammals swimming around the earth’s oceans, cryptocurrency whales refer to individuals or entities that hold large amounts of cryptocurrency. 

In the case of Bitcoin (BTC), someone can be considered a whale if they hold over 1,000 BTC, and there are less than 2,500 of them out there. As Bitcoin addresses are pseudonymous, it is ofte difficult to ascertain who owns any wallet.

While many associates the term “whale” with some lucky early adopters of Bitcoin, not all whales are the same, indeed. There are several different categories:

Exchanges: Since the mass adoption of cryptocurrencies, crypto exchanges have become some of the biggest whale wallets as they hold large amounts of crypto on their order books. 

Institutions and corporations: Under CEO Michael Saylor, software firm MicroStrategy has come to hold over 130,000 BTC. Other publically-traded companies such as Square and Tesla have also bought up large hoards of Bitcoin. Countries like El Salvador have also purchased a considerable amount of Bitcoin to add to their cash reserves. There are custodians like Greyscale who hold Bitcoins on behalf of large investors.

Individuals: Many whales bought Bitcoin early when its price was much lower than today. The founders of the crypto exchange Gemini, Cameron and Tyler Winklevoss, invested $11 million in Bitcoin in 2013 at $141 per coin, buying over 78,000 BTC. American venture capitalist Tim Draper bought 29,656 BTC at $632 apiece at a United States Marshal’s Service auction. Digital Currency Group founder and CEO Barry Silbert attended the same auction and acquired 48,000 BTC.

Wrapped BTC: Currently, over 236,000 BTC is wrapped in the Wrapped Bitcoin (wBTC) ERC-20 token. These wBTCs are mostly kept with custodians who maintain the 1:1 peg with Bitcoin.

Satoshi Nakamoto: The mysterious and unknown creator of Bitcoin deserves a category of his own. It’s estimated that Satoshi may have over 1 million BTC. Although there is no single wallet that has 1 million BTC, using on-chain data shows that of the first 1.8 million or so BTC first created, 63% have never been spent, making Satoshi a multi-billionaire.

Centralization within the decentralized world

Critics of the crypto ecosystem say that whales make this space centralized, maybe even more centralized than the traditional financial markets. A Bloomberg report claimed that 2% of accounts controlled over 95% of Bitcoin. Estimates state that the top 1% of the world control 50% of the global wealth, which means that the inequality of wealth in Bitcoin is more prevalent than in traditional financial systems: an accusation that breaks the notion that Bitcoin can potentially break centralized hegemonies. 

The charge of centralization in the Bitcoin ecosystem has dire consequences that can potentially make the crypto market easily manipulatable.

However, insights from Glassnode show that these numbers seem to be exaggerated and don’t take the nature of addresses into account. There might be some degree of centralization, but that may be a function of free markets. Especially when there are no market regulations and some whales understand and trust Bitcoin more than the average retail investor, this centralization is bound to occur.

The “sell wall”

Sometimes, a whale puts up a massive order to sell a huge chunk of their Bitcoin. They keep the price lower than other sell orders. That causes volatility, resulting in the general reduction of the real-time prices of Bitcoin. This is followed by a chain reaction where people panic and start selling their Bitcoin at a cheaper price. 

The BTC price will only stabilize when the whale pulls their large sell orders. So, now the price is where the whales want it to be so they can accumulate more coins at their desired price point. The following tactic is known as a “sell wall.”

The opposite of this tactic is known as the Fear of Missing Out, or the FOMO, tactic. This is when whales…