What is a crypto whale?
A crypto whale is an entity that holds large amounts of cryptocurrency. These whales hold enough cryptocurrency to influence liquidity and prices, and their actions are closely monitored.
Key takeaways
- A crypto whale is a user who holds a significant amount of cryptocurrency.
- The community and investors keep an eye on crypto whales as they can significantly influence price movements.
- Whales can also cause increased price volatility.
- Many whale accounts remain inactive for long periods of time and cause huge commotion in the crypto community when they become active.
Understanding Crypto Whales
Large cryptocurrency holders are called whales because their accounts are much larger than the small fish (accounts) in the cryptocurrency ocean. According to BitInfoCharts, four Bitcoin wallets held 3.56% of all bitcoins in circulation as of August 2024. The top 113 wallets held over 15.4% of all bitcoins. There are thousands of accounts that hold less than 10,000 BTC and can be considered whales.
These large accounts are closely monitored by the crypto community and investors. It is publicly announced on the Whale Alert website and on its X account (formerly Twitter) if whales are making transactions.
Another term that has emerged is “crypto minnow.” These are wallet addresses that hold very few cryptocurrencies compared to their whale counterparts.
The effect of a whale on liquidity
Whales can be a problem for cryptocurrencies because they are high-profile wallets that concentrate wealth, especially if it sits still in an account. This reduces the liquidity of a particular cryptocurrency when coins sit in an account instead of being used because there are fewer coins available.
The community has identified many prominent Bitcoin whale addresses: cold wallets or exchange reserve accounts, accounts that hold bitcoins recovered from thefts from the main accounts, and some unidentified ones. The top 113 accounts (over 10,000 Bitcoins) held over 15% (roughly 3 million BTC) of the bitcoins in circulation, with some not making any transfers for months or even years. However, these accounts (many of which are exchanges) are less likely to affect liquidity on a large scale than those holding between 100 and 10,000 bitcoins. These accounts hold 44.49% of all bitcoins in circulation, or about 8.8 million.
These are the accounts that have the most impact on liquidity because they don’t have very frequent transactions. For example, account 198a-g3Hi holds 8,000 BTC (about $476 million at August 30, 2024 prices). It started acquiring bitcoin on February 22, 2009, and hasn’t seen any outgoing transactions since.
The effect of a whale on the price
Whales can also increase price volatility, especially when they move a large amount of cryptocurrency in a single transaction. For example, the lack of liquidity and large transaction sizes can create downward pressure on the price of Bitcoin if an owner tries to sell their Bitcoin for fiat currency because other market participants see the transaction. Other investors go on high alert when whales sell, looking for indicators that they are “unloading” their holdings.
A common sign that cryptocurrency investors watch is the average exchange flow, or the average amount of a specific cryptocurrency deposited into exchanges. If the average amount of coins per transaction exceeds 2.0, it means that whales are likely to start selling them if it corresponds to a large number of users on the exchange.
The price is influenced not only by the average inflow, but also by the publicity given to a particular whale’s transaction. Bitcoin prices appear to react to transactions involving large amounts of cryptocurrency when they are publicly announced on X by Whale Alert or reported by the media.
Crypto whales can affect governance
Some blockchains grant governance voting rights to cryptocurrency holders. If a whale holds enough cryptocurrency, it could influence the direction the blockchain’s development takes, since in most cases, votes are weighted by the amount held by a voter.
It is possible for crypto whales to influence changes in a blockchain that create more benefits for themselves or make the blockchain less decentralized. This can affect the market for that specific cryptocurrency as it can make it more or less attractive to investors and users, thus influencing its price.
What Crypto Whales Mean for Investors
There are many circumstances in which someone with a large amount of cryptocurrency might move their holdings. It’s worth noting that the move doesn’t always mean a whale is selling their holdings. It could be a change in wallets or exchanges or a large purchase.
Sometimes whales try to sell their assets in small amounts over an extended period of time to avoid drawing attention to themselves. This can cause market distortions, causing the price to rise or fall unexpectedly. That’s why investors monitor known whale addresses to look for the number of transactions as well as their value.
What does it mean to be a crypto whale?
A crypto whale holds enough cryptocurrency to be able to influence the market.
How many bitcoins does it take 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 with 17 BTC a whale, as its total value on that day was around $1 million. However, others might not consider this account a whale, preferring to use the term for accounts with a much higher value.
How Much Cryptocurrency Makes You a Crypto Whale?
The definition is subjective and varies depending on the cryptocurrency. Whales typically hold an amount of coins whose value could influence market prices and liquidity.
The essentials
It’s a good idea to pay attention to what whales are doing if you’re a cryptocurrency investor, but the movement doesn’t necessarily mean you should panic. Many whales are companies that have invested heavily in cryptocurrency. These may be the ones worth watching if you’re going whale watching. Keep an eye on the whales’ known addresses to track their transactions and values. They’re publicly announced on the Whale Alert website and the X account (formerly Twitter).
The comments, opinions and analyses expressed on Investopedia are provided for informational purposes online. Read our disclaimer and warranty for more information. As of the date of this writing, the author does not own any cryptocurrency.
