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What are Bitcoin whales and how to spot them?

What are Bitcoin whales?

Bitcoin whales are people or organizations with substantial Bitcoin (BTC) holdings who are capable of influencing the market through their trading tactics.

The term “Bitcoin whale” is colloquially used to denote a holder with a significant stake compared to smaller participants, often referred to as “smaller fish” within the market. The owner of the wallet or cluster of wallets controlled by one entity may be an individual or a group that is pooling funds to make large investments.

Their vast holdings have been accumulated through mining, early investments and other methods. Whales have access to substantial Bitcoin holdings, which gives them the power to manipulate the market by making significant asset purchases or sales that result in price fluctuations. The abundance of whales and extreme volatility are frequently linked in the cryptocurrency space.

How much money makes a crypto holder a Bitcoin whale?

A person or organization is deemed a “Bitcoin whale” if they possess a significant quantity of Bitcoin; however, the threshold for this classification is not set. The widely acknowledged benchmark for being considered a Bitcoin whale stands at 1,000 BTC. This threshold is commonly cited by cryptocurrency analytics firms such as Glassnode, when identifying network entities (clusters of addresses) with a minimum of 1,000 Bitcoin.

As of March 2024, the distribution of Bitcoin ownership is highly concentrated. Only three Bitcoin addresses hold between 100,000 and 1 million BTC, totaling 577,502 BTC. The next 108 largest owners possess a combined total of 2,437,765 BTC, with individual holdings ranging from 10,000 to 100,000 BTC. Together, these 111 wealthiest addresses account for approximately 15.34% of the total Bitcoin supply.

Why do Bitcoin whales influence the market?

Whales wield significant influence over its market dynamics. Their massive holdings give them the power to sway Bitcoin’s supply and demand, triggering price fluctuations with their trades. When whales increase their Bitcoin stash, prices tend to soar, while selling off portions of their holdings can lead to declines.

By holding substantial amounts of cryptocurrencies, crypto whales can generate scarcity, driving up demand and value. Large transactions by whales can trigger significant price shifts, guiding other traders’ actions.

These whales often operate in the public eye, with their wallets tracked by the wider trading community. As a result, their trading decisions or anticipated moves can spark major price shifts as traders follow suit.

Some Bitcoin whales opt for over-the-counter (OTC) crypto trading to minimize their impact on prices, while others leverage exchanges to manipulate markets by signaling large buys or sells.

What trading strategies do Bitcoin whales use?

Crypto whales stand out from ordinary investors because they take a long-term view of the cryptocurrency market and often use advanced investment tactics.

Market manipulation

Large Bitcoin players occasionally engage in pump-and-dump schemes, which involve buying large quantities of Bitcoin at one time to drive up its price and then selling it at a profit, leaving other investors with a loss.

Additionally, they may start rumors on social media to boost interest and push up the price to attract smaller investors to join in. Bitcoin whales eventually sell, which causes a price decline and losses for small investors.

Accumulation

Whales can gradually accumulate Bitcoin by making calculated purchases at low prices or during market downturns. Over time, they increase their holdings of Bitcoin by taking advantage of opportunities to buy large volumes of Bitcoin at advantageous prices.

Long-term holding

By holding Bitcoin for an extended period of time, the whales can protect themselves from inflation or profit from the possible long-term increase in the value of Bitcoin.

Diversification

Beyond Bitcoin, some whales diversify their cryptocurrency holdings by investing in other digital assets to spread risk and potentially profit from various areas of the cryptocurrency market.

Short and long hunting

When Bitcoin whales predict a price decline, they can utilize short-term strategies to sell massive quantities of the cryptocurrency, scaring away smaller investors and further driving the market down.

Conversely, they can use long-term strategies by strategically acquiring Bitcoin over time, which will generate positive momentum and encourage smaller investors to join the market, thus driving up the price.

Stop-loss hunting

Stop-loss hunting includes the deliberate manipulation of the price of Bitcoin to trigger other traders’ stop-loss orders, allowing whales to purchase at reduced prices before a market bounce.

How to spot a Bitcoin whale

Whales frequently move funds secretly, using innovative methods to hide their identities and the amount of money they possess. Nevertheless, the transparency of blockchain and various Whale Alert platforms makes it possible to identify these whales. However, identifying them demands deep blockchain exploration and vigilant monitoring, termed on-chain analysis.

Here are some ways to spot a Bitcoin whale swimming somewhere close.

Search for large trades

To obtain valuable insights and make informed investment decisions, traders and investors can closely monitor the actions of large Bitcoin holders — a process referred to as “whale watching.”

Large trades made by whales frequently cause abrupt drops or increases in price. When a large amount of cryptocurrency moves, it’s often due to these whales transferring between wallets or exchanges. Bitcoin’s public ledger can help access all whale transactions and identify large amounts of Bitcoin being moved.