Hunting the elusive cyber whales

Courtesy Mark Mathosian

Herman Melville’s Moby Dick has long captured readers imaginations with its gripping account of the hunt for the great white whale. But in today’s cryptocurrency markets   there is yet another whale hunt underway, though the target is not quite so easy to find.   

A single bitcoin goes for over $5,000 and as such most holders only own part of a bitcoin. There are some, however, who own huge amounts of cryptocurrencies’ whether through purchases made in the currencies infancy or mass   purchases during dips in bitcoin’s value. These individuals are known as “whales” due   to their massive holdings and tremendous influence over the industry.

By “dumping” thousands or tens of thousands of coins, whales create minor panics causing the price of coins to fall. Other whales will then buy up as many of the coins as possible at the reduced price, thus increasing their clout and worth without putting more capital into the coin.   

As more and more crypto owners have become aware of whales there has been an increasing effort to resist them. If a rumour emerges before or during a mass sale of bitcoins many bitcoin holders will resist the urge to sell and may instead buy more coins.   

This increases the price of the cryptocurrency meaning the whale must repurchase their coins at a higher price resulting in a net loss.

But this strategy has led to a strange meta game in which those holding coins will attempt to convince the public that any dip in value is the whale attempting to dump coins.   

In reality, this is not always the case as there are legitimate reasons for seller or groups of sellers to liquidate a large number of coins. But   those holding coins may hope to spin such sales as the actions of whales in order to convince users to buy more. In this way they can stabilize losses and even turn a profit by selling a the height of the counter attack.

The world of cryptocurrencies still closely resembles the ocean described by Melville; it is dark and murky with confusion at every turn.   

The rapidly fluctuating value of bitcoins may stabilize over time, but only if the market adopts a more uniform response to whales and those individuals who see them in every dip.   

But for better or for worse, the hunt for whales is still very much a reality.