Bitcoin whales

Maybe you’ve heard the term before, but don’t really understand it. The term “whale” is often used to refer to the big players in the bitcoin market. Using the ocean as a metaphor feels quite appropriate when referring to the bitcoin market, considering you can extend the metaphor to include the big and the small fish, the sharks, the waves as market moves and so on. However, the users described as whales are actually far from the biggest players in the market.

Bitcoin dophins

These are the users wrongly referred to as “whales”. They show up in exchanges making transactions of 1,000 or even 5,000 BTC every once in a while and give the impression of being real heavyweight players that can manipulate the market prices if they wish, but this isn’t really true.

The truth is that the real big players don’t use the market the same way your typical consumer would.

The true bitcoin whales

BitCoin mining machine

The actual big players that we refer to are institutions like hedge funds and investment funds that have shown up. These funds tend to manage an extremely high volume of bitcoins and they put them through exchanges via special arrangements, meaning you don’t see these transactions being made. Because of this, these institutions are able to manipulate the market at will if they inject funds at the right time. Here’s where the “whale” part of the metaphor comes into play, because smaller fish can’t really go against a whale, either you move away from its path or you swim with it.

Bitcoin liquidity

Injecting an amount of, say, 50,000 BTC, over the course of a couple of days could cause massive price fluctuations. However, doing so just for the sake of it would be pointless, because just like smaller players, the goal of institutions is to buy low and sell high, meaning turning a profit after each investment made.

Say you buy 1 BTC and sell it a split second, the result would be a trading loss because of the spread between buy and sell prices. So let’s make an example with a higher amount of BTC: Let’s say someone buys an amount of 10,000 BTC in one go, assuming the exchange is able to absorb such an amount, the market prices would change instantly, and ask orders would skyrocket, meaning many high level participants would profit too.

Basically, large transactions like the one above could be appropriate for exiting a trade, but for initiating them not so much, because of the collateral effects it causes. Instead, the whales opt for a more strategic plan, injecting bitcoin through hundreds or even thousands of small orders over the course of hours, days or even weeks.

BitCoin mining machine

Follow me

The main goal of these institutions is to always maximize profit when initiating large trades, and it’s very beneficial to them if the small fish join them in the move since the trade can go further with them. The way they study this is by “priming” the market, basically assessing the mood of it at the time, its condition and the willingness of its participants to follow a certain direction.

After they identify an opportunity, they proceed to “massage” the market to manipulate participants to go in the desired direction. Therefore, the return on investment becomes even greater, the investment being the set up for this entire move and the outcome being that small retailers and new participants take the bait and join the rally, which increases its impact in the market and its slingshot effect.

A market-wide phenomenon

This entire thing might look a bit unbelievable, but it really isn’t. This is common practice among hedge funds. For example, large banks, which are the traders for most of the Forex market, have a dedicated team of traders that do the exact same thing through trade plans that can last days or even weeks.

The bitcoin market is ideal for these high risk institutional investors due to characteristics like:


  • Small market cap
  • Plenty of casual consumers
  • No bank competitors
  • Completely unregulated
BitCoin mining machine

To sum it up, that 1,000 BTC order that you see in the exchange orderbook isn’t the one that really matters. The transactions that go under the table are the ones that do. In addition to this, it’s not that hard to consider that the big players might communicate with each other whenever one of them is going to pull off a big move in the market, since that could be of interest to them.

As for the smaller fish in the market, the best plan of action is to simply swim with the whale and get away when you see that things are starting to get too hectic. The main challenge to this is figuring out when things like this are going to happen.

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