Bitcoin is a vast business backed up by significant investments worldwide. However, some substantial investors hold enormous volumes of bitcoins, making them capable of manipulating bitcoins’ rates, volatility, and liquidity. These traders who own massive quantities of bitcoins are what we call whales. The logic behind it is that the whales remain big plus strong enough that their movements significantly influence the smaller fish or the small traders who buy bitcoin in the exchanges.
About bitcoin whales in a nutshell
According to BitInfoCharts, Bitcoin whales possess a 2.71% value of all the bitcoins in circulation. That translates to $4.3billion as of the year 2020. Whales are appropriate for the bitcoin industry because they keep it going. However, they can be a challenge for the exchanges since they hold massive amounts of bitcoin that sit unmoved, which affects the bitcoin’s currency values. For instance, it can cause decreased liquidity, which can lead to increased volatility. Bitcoin liquidity refers to how easily you can convert bitcoins into instant cash without altering its market rates.
When the bitcoin whale tries to exchange their bitcoins with state currency when the liquidity is low, it can dramatically affect bitcoin’s rate. The small bitcoin holders will see the big transaction size in the exchanges, which will trigger bitcoins’ fire sale.
On the other hand, whales try to preserve anonymity by selling small quantities of bitcoins in various time lengths to deter attention. Consequently, that affects bitcoins’ currency values and causes the rates to fluctuate based on their exchange activities. So, whales influence the flow of smaller investors in the exchanges.
Whale clusters result when distinguished bitcoin holders own immense quantities of bitcoins but do not trade it leading to unspent bitcoin transactions. Based on the WhaleMap, whale clusters have three significant stake levels: USD 10,667, 10,570, and 10,407. In the bitcoin market, the whales are the big holders of bitcoin investments; therefore, BTC needs to guard them to sustain a continued rally.
Whale bitcoin trades are likely to trigger bitcoin highs.
Whales do not transact anyhow. They target when the market has high liquidity to move or trade the bitcoins since they trade in massive quantities of bitcoins. To correctly manage these high volumes of exchange orders, they aim to target significant liquidity in the bitcoin exchanges.
What causes the whale growth?
You must be asking yourself how whales accumulate significant volumes of bitcoins. What happens is, in the bitcoin exchanges, bitcoin trades are never at a fixed price or rates. The prices dramatically fluctuate based on market movement. Sometimes the retail exchanges are overwhelmed with fear of an expected bitcoin downtrend, which triggers active traffic in the exchanges. That prompts the whales to acquire because there are enormous quantities of BTC on the exchanges to purchase.
What has prompted the whale bitcoin movements
Recently, significant circumstances have prompted the whale bitcoin shifts in the markets. Firstly, lately, BitMex was held accountable for infringing the Bank Secrecy Act by the United States’ cryptocurrency supervisory body, plunging bitcoin by a whopping 4.1%. That significantly affected exchanges triggering the small dealers to trade.
Secondly, the US president recently tested positive for the Coronavirus, causing a general apprehension in the financial markets. The US market is a big one when it comes to bitcoin trades, and that slight change came as a shock to the commercial industries. That may have caused an escalation in the direct trading of bitcoins.
Following those two events, there was a general apprehension in the digital currency market, which triggered intense BTC trades. Consequently, BTC value was at $10,500 from $10,900. As the movements in the trades escalated in the subsequent days, the value progressed to $10,670.
Other factors that could intensify whale bitcoin movements
Still, other factors could intensify the activities surrounding bitcoin and cause a bitcoin uptrend.
Low funding rate
Currently, most of the bitcoin exchanges’ funding is neutral, with others being negative. That means funding low. Usually, when monetary aid is restrained, most prospective trades investors are waging in other digital currencies apart from bitcoin, which further intensifies the market’s trade activity.
The BitMex legal charge
Following the CFTC’s regulatory charge on BitMex, many investors moved 45,000 bitcoins from BitMex, which further intensified the active bitcoin trades. However, that didn’t surprise many of the bitcoin market stakeholders because, in a way, they expected the regulatory charge against BitMex. Many of the bitcoin traders have started moving to more stable trade-offs in terms of regulation, such as Gemini, which could profit the sale.
The final words
Following the events mentioned above, whale clusters have shown the fundamental levels that bitcoin has to hold to rally to sustain the ultimate bitcoin market.