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Crypto Whales Explained
What is a crypto whale?
In the cryptocurrency world, the term “whales” refers to large holders of a particular cryptocurrency who have the potential to significantly influence the market by buying or selling large amounts of coins.
Although we often call a wealthy individual a whale, the term can also describe an institution or organization that holds a significant amount of cryptocurrencies, and thus, have the power to move the markets up and down.
For example, if a whale were to buy a large amount of a particular cryptocurrency, the demand for that coin would increase. This would lead to an increase in price. On the other hand, if a whale were to sell a large amount of a particular cryptocurrency, the supply would increase, leading to a decrease in price.
It’s important to note that not all whales have the same motives or goals. Some whales may be long-term investors who are simply holding onto their coins for a period of time. Other whales may be short-term traders who are looking to take advantage of market movements.
In general, the presence of whales in the cryptocurrency market can have both positive and negative effects. On one hand, they can provide liquidity to the market and help to stabilize prices. On the other hand, their large trades can also create volatility and potentially lead to market manipulation. As a result, it’s important for individual investors to be aware of the potential influence that whales can have on the market, and to carefully consider the risks involved before making investment decisions.
When it comes to Proof of Stake (PoS) blockchains, whales have a considerable influence in on-chain governance processes (more funds at stake gives them more voting power). For these chains, the presence of whales can be both a good sign (in terms of stability) as they have strong incentives to act honestly and help the network grow. On the other hand, having whales controlling the majority of funds can bring a negative effect in regards to power centralization.