Whales are the largest inhabitants of the oceans, and the situation is no different in the cryptocurrency sphere. This title applies to the people or organizations that own the largest number of cryptocurrencies.
History
The first notable incident with bitcoin "whales" occurred in 2014. The infamous "whale," nicknamed "BearWhale," decided to put all of his 30,000 bitcoins up for sale. He later said he did so to make a profit on his investment and get out of the market.
He set an order to sell 30,000 BTC at $300. He realizes now that he could have made a lot more money if he had adopted a smart strategy to sell his position. Instead of going the route of "seemingly selling out," he put up a 30,000 BTC selling wall.
Obviously, this order caused quite a stir in the bitcoin community. Almost everyone was talking about a "grand conspiracy" designed to bring down the price of bitcoin forever. In the end, the warrant was executed.
Manipulation schemes
The value of cryptocurrency is determined mainly by supply and demand. That is, if a large portion of the volume of a particular coin is withdrawn from circulation, it will lead to an increase in the prices of the remaining coins in circulation. It follows that if a large number of coins are suddenly eliminated, the value of those coins will fall. As a consequence, whales have a unique ability to manipulate the cryptocurrency market to their advantage. Most often this feature is used in the bear market in order to increase the effect due to the panic moods of investors.
For example, what if a whale wanted to buy more coins at a lower price? All one has to do is start selling a significant portion of one's assets. This will cause downward pressure on the market and will likely lead to a short sale, i.e., increased liquidity of the coin at the reduced price. The whale could then simply buy back his coins at a lower price.
They can then send these coins into storage and reduce their circulation. In such situations, prices tend to rise and increase the value of coins that have already been purchased. This is a simplistic explanation of how whales can influence the market, but it clearly shows the power they wield.
In addition, the whales use the same asset price manipulation schemes as the most famous investment funds or banks on the stock market. In exchange trading and speculation, psychological factors always matter: it is enough to start a rumor about problems of this or that crypto platform, and their tokens start to decrease in price. An example of this is Elon Musk's tweets, after which the value of some "meme" cryptocurrencies often rises sharply.
Another non-obvious method of manipulation: moving large volumes between cold storage and an exchange account. All large transactions are tracked and broadcast by bots like Whale Alert, so investors don't even need to set up their own blockchain analysis tools. Any large transfers can get framed by rumors and various theories. Whale does not even need to actually use their own funds to place orders, the panic among inexperienced traders will do everything for them.
*This article is for guidance only. We don't encourage you to manipulate the market and risk your finances.