What is a Crypto Whale?
Crypto whales are groups that hold large amounts of cryptocurrency. These whales own enough cryptocurrency to influence liquidity and price, and their behavior is closely monitored.
Key Takeaways
- Cryptocurrency whales are users who hold large amounts of cryptocurrency.
- The community and investors pay close attention to cryptocurrency whales because they can have a major impact on price fluctuations.
- Whales can also cause increased price volatility.
- Many whale accounts remain dormant for long periods of time and create a huge stir in the cryptocurrency community when they become active.
Understanding Crypto Whales
Large cryptocurrency holders are called whales because they have accounts that are much larger than the small fish (accounts) that inhabit the cryptocurrency ocean. According to BitInfoCharts, four Bitcoin wallets held 3.56% of all Bitcoin in circulation as of August 2024. The top 113 wallets held more than 15.4% of all Bitcoin. There are thousands of accounts considered whales that hold less than 10,000 BTC.
These large accounts are closely monitored by the crypto community and investors, and when whales make transactions, they are publicly announced on the Whale Alert website and its X (formerly Twitter) account.
Another term is “crypto midgets,” which are wallet addresses that hold very little cryptocurrency compared to the larger cryptocurrency players.
Impact on whale liquidity
Whales can be problematic for cryptocurrencies because they are high profile wallets that concentrate wealth, especially if they are left unused in an account. If coins are left unused in an account, there will be fewer coins available and liquidity for a particular cryptocurrency will decrease.
Many of the top Bitcoin whale addresses have been identified by the community and include exchange cold wallets and reserve accounts, accounts holding Bitcoin recovered from thefts of top accounts, and some unidentified accounts. The top 113 accounts (over 10,000 Bitcoin) hold over 15% of Bitcoin in circulation (about 3 million BTC), with some accounts not sending any Bitcoin for months or years. However, these accounts (many of which are exchanges) are less likely to have a significant impact on liquidity than accounts holding 100-10,000 Bitcoin. These accounts hold 44.49% of all Bitcoin in circulation, or about 8.8 million Bitcoin.
These are the accounts that have the most impact on liquidity due to their infrequent trading. For example, account 198a-g3Hi holds 8,000 BTC (approximately $476 million at the August 30, 2024 price). This account first started acquiring Bitcoin on February 22, 2009 and has not made any sending transactions since then.
How whales affect prices
Whales can also increase price volatility, especially when they move large amounts of cryptocurrency in a single transaction. For example, a lack of liquidity and large trade sizes can put downward pressure on the price of Bitcoin when holders try to sell their Bitcoin for fiat, as other market participants see the transaction. When whales sell, other investors become wary, watching for signs that they are “dumping” their holdings.
A common sign that cryptocurrency investors look out for is an exchange's inflow average, or the average amount of a particular cryptocurrency being deposited on an exchange. When the average coin amount per transaction exceeds 2.0, it is likely that whales will start selling if there are a lot of people using the exchange.
The price is influenced not only by the inflow average, but also by the publicity given to certain whale transactions. Bitcoin prices seem to react to transactions involving large amounts of cryptocurrency when they are publicized on X by Whale Alert or reported by news media.
Crypto whales could influence governance
Some blockchains give governance voting rights to cryptocurrency holders. If large investors hold enough cryptocurrency, they can influence the direction of blockchain development, as their votes are almost always weighted according to their holdings.
It is also possible for large cryptocurrency investors to influence changes to the blockchain to further benefit themselves or to make it less decentralized. This can affect the market for a particular cryptocurrency by making it more or less attractive to investors and users, which can affect its price.
What Crypto Whales Mean for Investors
There are many situations in which someone with large cryptocurrency holdings might move their holdings around. It is important to note that a move does not necessarily mean that a large investor is selling their holdings. It could be that they are changing wallets or exchanges, or making a large purchase.
Sometimes, whales may try to sell assets in small amounts over a long period of time to avoid attracting attention. They can create distortions in the market, causing prices to rise and fall unexpectedly. That's why investors monitor known whale addresses for transaction volume and value.
What does a cryptocurrency whale mean?
Crypto whales hold enough cryptocurrency to influence the market.
How many Bitcoins do you have to own to be considered a whale?
It depends on the market value at the time of the transaction. On August 30, 2024, 1 BTC was worth $59,080.73. Some might consider an account holding 17 BTC a whale, since the total value on that day was about $1 million. However, some would not consider the account a whale and would prefer to use the term for accounts with higher values.
How much cryptocurrency does it take to become a crypto whale?
The definition is subjective and varies between cryptocurrencies, but generally, whales hold a large amount of coins that can affect market price and liquidity.
Conclusion
If you're a crypto investor, it's a good idea to keep an eye on whales, but their activity isn't necessarily a reason to panic. Many of the whales are companies that have significant investments in cryptocurrencies. If you go whale watching, it might be worth keeping an eye on these companies. Keep an eye on known whale addresses to track their transactions and value. These are published on the Whale Alert website and on the X (formerly Twitter) account.
Comments, opinions and analyses expressed on Investopedia are for online informational purposes only. For more information, please read our Warranties and Disclaimers. At the time of writing, the author does not own any cryptocurrency.
