What happens when a whale jumps into the pool?

Todor Todorovic
April 23, 2024
Reading time
5 minutes

In the volatile cryptocurrency market, "crypto whales" ( substantial holders of digital currencies) significantly influence price movements and market trends. These individuals or entities can shift market dynamics with their large-volume trades, impacting liquidity and market stability. Defined by their ownership of a significant portion of a cryptocurrency's circulating supply, their influence varies with each asset’s market capitalization and trading volume. Understanding these key players is crucial for analyzing the impacts of their actions on the decentralization of blockchain technology.

Market Impact

The presence of "crypto whales" in trading pools has both beneficial and detrimental effects. Crypto whales provide significant liquidity, which can influence market stability and reduce drastic price changes. Their involvement can serve as a confidence indicator, encouraging broader participation from retail and institutional investors. Additionally, significant investments by whales can attract public and media attention to certain projects, improving their market presence and perceived legitimacy.

However, alongside these positive effects, whales are individuals who look out for their own interests, which can negatively impact the market. Due to the large concentration of tokens in their possession, they can easily manipulate prices and cause panic or greedy buying (pump and dump effect). Moreover, their presence undermines decentralization; with a significant amount of tokens under their control, they have a substantial influence in decision-making within the protocol, leading to risks of centralization.

How to catch a whale?

We cannot fight against the whales, as they will always act in their own interest, but we can monitor their behavior and base our next moves on that. Two important factors that can tell us a lot about the whales are their movements and the amount of tokens they possess.

Alterscope has integrated these parameters into its system. The Whale Movement indicator will inform us about the current movements of the whales; through this parameter, we can notice significant current events. If this indicator falls below zero, it means that the whales are selling off their tokens, which can lead to a decrease in price and trigger panic selling. If the market is stable, and sudden sales are occurring, it can indicate some adverse events within the protocol itself. Conversely, a positive indicator means that the whales are active with purchases and investments in the project, which can lead to a spike in price and popularity of the project itself.The second parameter to monitor along with whale movements is Whale Holdings, which represents the amount of tokens owned by the whales. With this factor, we can see how much influence they have on the project, how much their actions can affect the price, and whether there is a risk of centralization.

By tracking these two factors, you have the opportunity to turn every action of the whales to your advantage and predict their behavior. Or, if you are a long-term person, it will help you choose a project that provides stability and lacks the influence of individuals, leading to the decentralization toward which crypto aspires.

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