Homework Post for professor @wahyunahrul by @abdulkahargunu

Cryptocurrencies, cryptocurrencies, cryptocurrencies are the real deal nowadays, these currencies make paper money look like child’s play in comparison to them. I still remember the first time I heard of bitcoin, the shocking part wasn’t the name but the value of a single bitcoin, which at that time was valued at $13,000.

In steemit crypto academy season 3 beginner’s series week 1, professor @wahyunahrul made a splendid lecture on Whales - The Driver of Cryptocurrency Value, where he spoke on how the crypto market is moved by some people or groups of people and how it affects the market values of various cryptocurrencies. This is my homework post for the lecture, the questions asked were:

Whales, this here refers to investors who hold cryptocurrencies in huge amounts, and because of the number of tokens they own, they are able to somehow dictate the rise and fall in value of the respective cryptocurrency tokens they hold.

In my opinion, these whales hold the big guns to call the big shots in the cryptocurrency market, they can literally make the value of a crypto coin rise from zero to hero in a matter of minutes, and they can also send the world crushing down on it in moments.

Why Whales Are Feared by Small Investors

Every investor has the mindset of gaining profit wherever they put their money, for a small investor who knows of the presence of some people who can mess up his or her profit, there is always a natural instinct to fear these whales and this is why:

The cryptocurrency market uses the “The law of Demand and Supply” to determine the rise or fall of the value of the various cryptocurrencies, this law works in the sense that, for a given market, this law explains the relation between the sellers of a particular resource and the buyers for that resource.
This law states that, if there is little demand for a resource (in this sense, cryptocurrency tokens), the supply will be less, and the price will be high (in this sense, the value of the said cryptocurrency increases), and if there is a high demand for a resource (in this sense, there are many cryptocurrency tokens in the system), the price will be lower.

Since, the Whales hold the asserts in huge quantities, once they decide to sell the asserts in their possession, this means that there’ll be more asserts in the system, which means that the market will go on a Bearish trend (the market value of the said cryptocurrency will reduce).
Once the whales decide to buy asserts in huge quantities, the market experiences a Bullish trend (the market value of the said cryptocurrency rises). So, for small investors knowing of the existence of beings that are able to make the market rise or fall within minutes will naturally fear these whales because of the Law of Demand and Supply.

2). Will we be able to take advantages of the existence of the whale that is so feared?

Yes, whales are feared, but that does not imply they cannot be exploited. To do so, we'd need to group all the whales together as a single whale and evaluate the market chart of the selected cryptocurrency as if it were influenced by one whale. The trade chart will be considered as the actions of that one whale.

By keeping tabs on the market closely, small investors will have to study and make use of the various phases that the market is in and where it will likely be sometime after. It would be better to enter at an accumulation phase because there’s a probable uptrend anticipated, and wiser to exit at distribution phase when prices are about to take a downtrend or dip.

Whales set traps to bait small investors for their own gains. Hence it’s advisable to take precautions to avoid whale traps. These are some procedures that can be taken to avoid being caught in a whale trap.

1. Know what you are doing
   The first mistake that people make when it comes to crypto trading is that, they probable hear about how people are profits and just because they fear missing out on a way to make profit and also join in not knowing what it entails, the advice it that you shouldn’t be trying your luck but know what you’re doing

2. Know your personal risk profile
   It's great to make money, but one must also be prepared to lose money they can afford, so keep this in mind when playing with the whales, if one is aware that the risk is significant, it is advisable to pursue other possibilities, such as long-term investing.

3. Don't bet everything on a single cryptocurrency
   It is not a good idea to put all of your money into a single cryptocurrency, Other cryptocurrencies should be studied, and assets should be divided to invest in other cryptocurrencies to reduce losses and boost profits.

4. Analyze Graphics
   As a person who has chosen to invest in cryptocurrencies, it is advisable to make technical analysis of the market charts if you wish to have a chance of even riding along with the whales.

Once studied carefully, small investors can make use of whales and also swim along with them, but one must be cautious else one will end up in a trap set by the whales.

1. Find an example of a whale's cycle on a cryptocurrency chart, and do a detailed analysis of the phases in the cryptocurrency chart (don't take the cryptocurrencies that are ranked in the top 10 as examples). (Screenshot Required)

In the cryptocurrency world, these are the top 10 ranked cryptocurrencies, this was gotten form coinmarketcap

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A detailed analysis of a whale’s cycle on a cryptocurrency
The crypto I will use to make my detailed analysis is DeFiChain. I used the DFI|USDT pair over a 4-hour timeframe, from coinmarketcap.

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From the above chart, the various phases are indicated. The various phases indicated are:

1. Accumulation Phase
   At this phase, the whales buy asserts in small quantities that would not draw attention to the assert, while other investors are in the dark. At this phase they gather as nuch coin as they can, hence the name accumulation. at this phase, both price and volume fall within a small range.

2. Absorption Phase (Uptrend)
   After the accumulation phase, the whales then started buying the asserts in large quantities, this way the asserts they own would increase and also boost the value of the crypto coin. Once the ther whales realise this trend, they also join in on the profit making adventure. At this phase the volume of the cryptocoin increases.

3. Distribution Phase
   At this phase, the whales sell their profitables posistion to small investors and in doing so the they push prices down. This is where most small investors fall into the traps or whales, because they think that the prices may rise hence they decide to buy more asserts.at this phase the volume is relatively stable.

4. Downtrend Phase
   This is the point where the whales had sold most of their asserts to the small investors hence it caused the value of the coin to depreciate. At this point the small investors had no choice but to sell their asserts in hopes of not having to deal with a lot of loss.

4). If you are a “Whale”, what cryptocurrency would you choose to invest or trade (except those that are in the top 10), explain why you chose that cryptocurrency.

If I was a whale, the crypto coin I would choose to trade in would be DeFiChain, DFI|USDT pair. My reasons being that, It is not a stable coin looking at the charts, over the duration of last month, this crypto coin has experienced drastic changes and still recovering from it so now would be a good time to raise the bars and earn some profit.

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Looking at the chart above, we find out that its not stable and with the pressure along with its lattest downtrend, this cryptocoin cold be used to make huge profit.

5)Do a kind of analysis as a whale with the phases that I explained earlier on the chart of your chosen cryptocurrency, show where you will start buying the cryptocurrency, and explain how you will take profit. (Screenshot Required)

This is how I will do my analysis as a whale, I’ll use DeFiChain, DFI|USDT pair.

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As a whale, this is how I would behave the various phases

Accumulation Phase: At this phase, I would buy as much asserts as I can in small unnoticeable chunks while other investors are in the dark.

Uptrend Phase: Once I’ve accumulated enough asserts and the supply of the said assert is low on the market, the law of demand and supply will definitely work in my favor and I’ll push prices up. An assert who’s price is currently shooting up will naturally attract new investors, hence there’s a period of accumulation for a while.

Distribution Phase: Over here I sell my profitable positions to smaller investors who fall for my trap thinking the distribution is another sort of accumulation.

Downtrend: After I’ve taken enough profit and out of stock, I make attempts to push prices down, swallowing up all naive small investors.

Conclusion

Whales have developed a self-sustaining mechanism for benefiting themselves. they are able to manipulate the crypto market in a lot of ways to be able gain as much profit as possible.
It is good to fear them but that dosen't mean they can't be taken advantage of, yet one must be cautious when doing so and not end up playing to their game.