Do whale investors affect cryptocurrency market?

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Introduction

If you have been in crypto for a while then surely you must have heard of the term whale, now when you hear of whales generally what comes to mind, who are the whales in cryptocurrency who which kind of people do we refer to as whales in this space, well if you don't already know then please allow me educate you on that. This is a term used to refer to a particular type of investors who are in possession of large amounts or cryptocurrency, they often hold huge sums of a cryptocurrency asset, when an individual or an entity holds large sums of a cryptocurrency constituting for a good percentage of that asset the individual or they are refered to as whales as the case maybe.

The question now is this whales, do you think that they affect the cryptocurrency market, given that they hold huge sums of a particular cryptocurrency do the invariably affect the market movement of that asset, I mean would such assumption be wrong, well it is only sound and reasonable to assume or to conclude rather that the whales do have a major impact on cryptocurrency market given they are in possession of huge holdings as such it becomes easier for them to effect the market.

So the question of if whales affect cryptocurrency market is not really a question because it's clear enough that one who controls or hold huge sums of any coin would be able to influence the price movement of that asset, if they sell the market would likely dump and when they are buying others tend to do as well leading to uptrend as well so both market sentiment and liquidity could really be influenced by whales and today I will discuss some ways I believe this whale investors affect cryptocurrency market.

Price Manipulation

This is just one way them whales affect the cryptocurrency market and this is through price manipulation, yes whales often do this through what we commonly know as pump and dump, yes the whales are in possession of large funds and sometimes they are backed by hedge funds due to the abundance of funds it makes it easier for them to influence prices of cryptocurrency and pump and dump is a popular trick they use for this.

How does this work? They often do this by buying up huge quantities of an asset, an amount thats huge enough to make the price begin to move up and this might be just a ploy to make investors and other retailers start buying in thinking that the market trend have changed and when they have seen the liquidity they want this whales will sell off their large holdings leading to drastic drop in the price of that asset and at the end they make huge gains whilst the unsuspecting investors suffer loss.

The whales in this market manipulation trick they usually buy when they want to sell and when they want to buy they sell off too tricking people to sell off thinking the market will never recover just to get the asset at a price they are comfortable to buy in, so the whales easily manipulate cryptocurrency prices leading to either a sharp increase or a sharp decline in price and they often cause extreme price volatility by their decisions, so price manipulation is way whale investors affect cryptocurrency market.

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Market Liquidity

This is another way too that whales affect the cryptocurrency market as they are one of the big liquidity providers of the cryptocurrency market. That isn't really surprising considering the huge sums in their possession, because they hold large amount of the cryptocurrency that's why they invariably contribute immensely to the liquidity of the market, so they whales serves the purpose of liquidity providers in the cryptocurrency market which is one way they affect the market.

How do? Because this whales are actively involved in buying and selling of cryptocurrency, this continuous action by them helps a great deal to add much needed depth to the cryptocurrency market and add great liquidity to the cryptocurrency market as well and this ensure that during large trades there is less risk of much slippage and this is thanks to the whales and their active buying and selling action in the cryptocurrency market.

The liquidity they provides helps to ensure smoother discovery of price in the market and much needed market depth, and there is even demerit to having a market with little or no whale investors as lack of whale investors and the liquidity they provide it could leave the market in a rather erratic state as price tend to swing in a rather disproportionate manner unlike with market with more whales activity, infact when there are many whales in a market it helps to add stability but with few whales it means when the whale sells everything will go crazy so yes market liquidity is role of whales in the cryptocurrency market.

Market Sentiment and Influence

Market sentiment and other influence is also another notable way whales influence the market, watch the market then overtime you would see that people watch out for whales activity and often depending on what whales are doing it affects the psychology of other investors, so yes whales influence market sentiment a great deal, that's evidently felt in this space.

Whale movement is monitored closely by others, most participant in the market simply wants to do what the whales are doing, if they notice that a certain whale address has been accumulating a certain coin that will lead them to be bullish on the coin and they will start buying that asset too, let's say news comes out now that a certain whale just purchased $1.5 Billion worth of say Solana, what will happen is that every other participant in the market will jump into Solana as they will wonder why they whale is buying in.

Whales purchase always create speculation and if there is a certain report of whales suddenly selling off an asset it would cause panic in the market and lead many investors to start to sell off also as they would become extremely fearful and speculate that this sell off by the whale mean that the coin would dump and as such market sentiment could easily turn fearful by the activity of whales, so whales have influence over market sentiment that's just another way they affect the cryptocurrency market.

Market Power and Control

Depending on the project too and how it's built the whales tend to have great market power and utmost control over the project exerting great influence over it's governance and they do this due to they fact they hold quiet a huge sums of the coin supply this places in a position where they control the proposal and even changes in the protocol which is really not ideal.

Because if they whale exert this kind of influence to the point they are in charge of the governance and proposal of the project it inevitably affect the long term future of that project, it could even hinder it's future development as they would bend things to their whims not minding the overall benefits of the project or it's community, infact this could cause the project loss any resemblance of anything decentralization.

With decision making concentrated in the hands of the whales the market becomes a centralized one which is against the idea of what every project built on blockchain strive for and this happens when just a small group of whales happen to control a great amount of the supply of that cryptocurrency they could literally take control of the very market movement of that coin and any proposal or decision is based on their own interests serving their nefarious purpose, this is a sure way to kill a project. That's another way whales affect cryptocurrency market due to their huge funds.

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Conclusion

So do whales affect the cryptocurrency market? Yes they do very much thanks. How do they do that? They do this by price manipulation, liquidity provision, influencing market sentiment and market control and power. So while whales are good to add depth to a market they shouldn't be allowed to take control of the decision making of a project ifnot it brings centralization which we are fighting against.