Ten Mysterious Crypto Whales Influence Bitcoin Prices
Kitco Commentaries | Opinions, Ideas and Markets Talk
Featuring views and opinions written by market professionals, not staff journalists.
Editor's Note: As Blockchain Week is set to kick off in NYC, Kitco News is pleased to announce that it will be bringing more regular Crypto and blockchain content to our site. Look for new content from well-known and respected crypto writer Tanzeel Akhtar every week.
Those trading crypto will often hear the term "whale" and as the name suggests it is used to describe huge cryptocurrency holders. Those Bitcoin wallets with around $1 billion are referred to as whales. Putting any future price target on BTC is notoriously difficult due to these whales being blamed for unexplained market phenomenon.
Per Wimmer, a former Goldman Sachs banker and the founder of Wimmer Financial LLP, a London-based corporate-advisory firm, explains: “The crypto market is dominated mainly by ten big whales or privates. They are massive in the market and take up a lot space and volume so if you take the top 10 or even 50 you will have a lot of the volume covered already. It is too easy to manipulate the market so far.”
Wimmer who has extensive connections in the family office and private capital worlds disagrees with the widespread rumors that institutional players are entering the space. Due to the increase in crypto crime and exchange hackings resulting in millions being stolen this has put institutional investors off.
He adds, “Crypto is very niche. It is here to stay and remain for a considerable amount of time as a niche [investment]. There is a degree of validity about crypto. I like the fact it is intimidating governments. I think it is great to have that aspect of it.”
There are many trading manoeuvres Bitcoin whales will use to profit, such as the trading tactic commonly called the "rinse and repeat cycle.” This is when a trader or whale with huge holdings starts selling bitcoins lower than the market rate which causes a panic sell off by small-time traders. The whale will then have sold just below the current market value and enough to watch panic ensue. Then the whale waits and watches the panic selling take place until the Bitcoin prices reach a new low. This is the time when the whales quickly scoop up more Bitcoins hence the term 'rinse' and then ‘repeat.’
André Bruckmann, the founder of Mycro explains, “Price manipulations at Bitcoin are extremely expensive due to its liquidity, essentially benefiting no one. For example, if a large Bitcoin holder sells large quantities of BTC, the price will only fall if it is placed at the market price and this will lose money. The same applies if a large investor places a large buy order for BTC at the market price - the price rises and he buys at too high a price. Large volumes are usually settled OTC and this does not affect the price on exchanges at all.”
Charles Hoskinson, the founder of cryptocurrency Cardano (ADA) and the CEO of IOHK says: “The thing about our [crypto] industry is that it tends to move in spurts. It kind of spikes up, dies down and stays flat for a long period of time. Then there’s another spike and its boom time again. Regardless of when you come in there is always going to be spikes.”
According to Hoskinson, the next spurt will come from institutional money and the dawn of security token offerings. “The really smart money is aware that the market is not yet stable. It is not at the level of maturity to support institutional surge. Within the next 12 to 24 months I think the environment will be ready for institutional money to enter and it will enter with a toe in the pool.” adds Hoskinson.
In this current state prices are open to manipulation and with an unregulated crypto market many institutional investors are watching from the sidelines.