Bitcoin Whales and how they Can Manipulate the Market
You may have heard Bitcoin has been performing amazingly this year. It’s well on its way to setting a new all-time high record! FOMO is a very real thing and lots of new people will be getting into this space. But have you heard of a Bitcoin Whale?
I was watching the fantastic Good Morning Crypto show by Ivan on Tech recently and he mentioned something very interesting, that I wanted to share with my readers.
Whales are manipulating the market.
That sounds like a strange statement but let me explain…
A Bitcoin whale is a high net-worth individual or entity that possesses a relatively large amount of Bitcoin compared with the amount in circulation. As the market cap of Bitcoin is only £227 Billion (Gold is approximately £7.4 trillion) these individuals have the power to significantly influence supply and demand and hence the price of Bitcoin. The relatively small market cap of Bitcoin and other cryptocurrencies is one of the reasons we see such extreme volatility in price.
These whales can manipulate the price of Bitcoin by selling off some of their coins at opportune moments. This increases the supply and, due to the laws of supply and demand, decreases the price. Inexperienced traders, and I count myself in that category, see the price fall and start to sell their coins for fear that their investment will lose too much value.
This causes a snowballing effect. As more and more people sell their Bitcoins the price continues to fall.
All the whales have to do is bide their time and then, when the time is right, buy back a vast number of coins at heavily discounted prices. This reduces the supply of coins in circulation and drives the price back up.
Whales accumulate more coins and wealth, the inexperienced traders lose their coins and their investment.
This is obviously not the only thing that can affect the price of Bitcoin, markets are very complex and unpredictable. This is also not financial advice, as I am definitely not qualified to give that. Just something for you to think about!
You can find some pretty nice charts relating to Bitcoin whales over at whalemap.io
If you want to learn a bit more about how Bitcoin and the Blockchain works I wrote a beginners guide a while back which you can check out.
This article was originally posted over on my personal blog, The Inquisitive Dev, where I cover all things coding, software design and crypto. If you liked what you read please consider visiting my site and subscribing.
Thanks for reading.
