Cryptocurrency, Bitcoin Whales 2020 – Everything You Need To Know

Before we dive into the water and examine cryptocurrency whales, it is first necessary to understand the underlying technology of cryptocurrencies: blockchain.

If you are into crypto, you have probably had friends or family respond in skepticism whenever you try to justify your investments. Some of the most common arguments against cryptocurrency that we hear from the general public is that “it doesn’t even exist” or “it is used for illegal activities because it’s anonymous” or “how do you even know if you really have the cryptocurrency?”.

Most of these qualms can be summarized in a central theme: the perceived lack of transparency when it comes to cryptocurrencies. However, this couldn’t possibly be further from the truth because of how cryptocurrencies use blockchain.

Apart from certain privacy coins like Monero, almost every single cryptocurrency has its transactions registered on a transparent blockchain which is available for viewing on a public ledger. This updating list of transactions shows you how much cryptocurrency was moved, where it came from, and where it’s going. Although you as a viewer don’t know which wallet address belongs to, the transaction information is nonetheless there for you to see (imagine if banks allowed this!).

For some blockchains such as Ethereum, you can even see how much cryptocurrency some wallets are holding. This sort of information can be really useful in finding out whether or not an asset is safe to invest in. Assets where a few parties a substantial percentage of the available supply are usually scams. Since this information is available to the public and there is so much of it, many API services such as Whale Trace automatically analyze this data to help cryptocurrency traders make better investment decisions since they can get a sense of what’s going on behind the scenes.

What are cryptocurrency whales?

Twitter: @J0E007

Cryptocurrency whales are individuals or entities who hold a large amount of any given cryptocurrency. Notable individual whales include Twitter happy J0E007, investor Tim Draper, twins Tyler & Cameron Winklevoss of Gemini, and Changpeng Zhao, Binance’s CEO. Notable institutions, or “retail” investors with large amounts of cryptocurrency include Pantera Capital, Falcon Global Capital, and Fortress.

While many such as Whale Alert’s creator had speculated that cryptocurrency whales would go extinct as time went on, recent data is actually showing a steady increase in not only Bitcoin whales, but wallets which hold more than 1 BTC. This is speculated to be due to the recent price crashes due to the coronavirus outbreak, such as the ~50% drop on March 12th-13th. Many parties took advantage of market fear and bought while blood was in the water. 

What people consider to be “a large amount” of cryptocurrency is a subject of debate and usually this assessment is made based on the US$ value of the assets held as well as the percentage of the total supply existing or in circulation. For example, many transaction APIs such as Whale Trace will report transactions of only a few hundred Bitcoin since the US$ value is incredibly large. There isn’t usually too much point in tracking the transactions moving a large percentage of an asset when the market cap for the asset is small.

For example, many cryptocurrencies are pre-minted with a fixed supply and usually the founders or founding company keeps a substantial cut of those coins. However, if the crypto tanks in value, as many did during the ICO boom-bust of 2017-2018, even if they move these large amounts between wallets it wouldn’t register with tracking APIs since the USD$ value of these coins is negligible. Still, one could ask where you draw the line on what constitutes a large US$ value.

In regards to cryptocurrencies such as Bitcoin, there appears to be some degree of consensus that the whale designation should be based not on the US$ value but on the actual amount of BTC instead. Infographics such as the one shown below have circulated on various social media websites and cryptocurrency forums. As you can see, it states that a Bitcoin whale is anyone with more than 1000 BTC, and even denotes additional categorizations for individuals or entities with substantially greater or smaller amounts of Bitcoin. These include Humpback Whales on the upper end, and Sharks, Dolphins, Fish, Octopuses, Crabs, and Shrimps on the lower end. Most of us fall somewhere on the lower end, since the majority of Bitcoin whales are speculated formed much earlier on. This makes us one of the last to arrive to the Bitcoin early adoption party, which is still very much in full swing!


Who is the largest cryptocurrency whale?

This is a question which is often asked but almost never answered. The largest cryptocurrency whale seems to be Satoshi Nakamoto himself. When Nakamoto created Bitcoin in 2008, he allegedly kept over 1 million BTC for himself in something which is now referred to as the “Tulip Trust”. This name is based on the infamous ‘tulip mania’ which took place in the Netherlands in the 17th century. In 1636, the price of tulips suddenly skyrocketed and crashed about a year later in 1637. This event is frequently referred to as the first recorded instance of a speculative bubble, which some legacy investors consider cryptocurrencies like Bitcoin to be.

To their chagrin, there are in fact some very big differences between cryptocurrencies and plants, the most notable being the almost limitless potential for use-cases in a modern, technological world. This is especially true when it comes to cryptos such as Ethereum which allow you to create decentralized programs. Still, it’s daunting to consider that Nakamoto’s Tulip Trust is worth a whopping US$7 billion at the time of writing. That’s more than 10% of Bitcoin’s current market cap, and almost 4% of the market cap of the all 5000+ cryptocurrencies combined!

Why are cryptocurrency whales important?

There are two reasons why cryptocurrency whales are important. First and foremost, they can have significant effects on the short-term price action of a cryptocurrency. As discussed in the first section, whales are either those with large US$ values of an asset or a large percentage of its existing and/or circulating supply. “Good” cryptocurrencies such as Bitcoin and Ethereum have relatively healthy distributions between wallets. Their markets also transact much more volume daily. This means they are liquid and therefore less volatile in comparison to many other cryptos with smaller market caps since whales can’t make as big of a “splash” on price.

It should also be noted that although cryptocurrencies like Bitcoin and Ethereum are still incredibly volatile in comparison to traditional investments, this volatility has actually been decreasing as time goes on. Unfortunately, the same cannot be said for smaller cap coins and emerging assets. Many ICOs were essentially “pump and dump” schemes where the founding members kept a substantial percentage of the asset, manipulated its price due to poor liquidity, and then discreetly sold their shares while continuously promoting the value of their project. Even larger cap coins such as Ripple’s XRP have allegedly engaged in this malpractice, though clearly not to the extent of smaller cryptos.

Twitter: @whaletrace

The most vivid example of how whale transactions influence price has to do with how traders react to these publicly available transactions. If a whale moves a large amount of cryptocurrency from their wallet to an exchange, what does that signal to the market? An intention to sell, or at least to trade. Whenever a whale moves a large amount of crypto from an exchange back to their wallet, this suggests the opposite – they intend on holding on to that asset for some amount of time. Day traders will often take note of these transactions and then position themselves accordingly by selling before the market crashes or buying before a price pump is expected to occur. Increases in price are usually preceded by a large amount of stablecoins being transferred to an exchange, such as USDT and USDC. Leveraging these signals can be extremely profitable, which is why many financial apps such as CryptoMood include them as part of their features.