Steemit Crypto Academy Season 3 Week 1 | Whales - The Driver Of Cryptocurrency Value | Professor @wahyunahrul
Am gladdened once again for yet another exciting season of this platform. It is of great privilege to partake in this week's Crypto Academy Contest presented by Professor @wahyunahrul as it will be an avenue to have more understanding of the intricacies about Crypto currency and the driver of it value.
Based on the understanding that you've gained from this class, explain why whales are so feared by small investors?
First, to have an insight on why whales are so feared by small investors, the understanding of who whales are should be brought in the picture.
Whales are those people who invest in the crypto currency market by buying and owning a large sum of the shares of a particular or some digital currencies in the market. by so doing in owning this large sum of crypto currency...it affects the movement of crypto currency value both positively and negatively.
How do they affect the movement of the crypto currency value? Whenever there is much influx of those buying a particular asset, the asset becomes low in circulation thereby increasing the value of the asset in the market which leads to a bullish or uptrend movement of the asset but when there is much influx of sellers of that particular asset than that of buyers, it makes the value of the asset to depreciate thereby leading to a bearish or downtrend movement of the the asset in the market.
The above description can be seen in our daily business routine for instance, in a market where there is more circulation of a particular commodity, when the buyers of that particular commodity are not much, the price of the commodity tends to fall. but when there are much buyers of a particular commodity, but the commodity is not much available for the buyers, the price value of that commodity tends to rise. This is exactly how whales affect the movement of crypto currency
Whenever whales buys and owns larger quantity of a particular or different crypto currencies, the market value of the asset increases and so, the small investors who buys and owns smaller quantity of an asset can actually gain from the increase. But when it reaches a point where whales sells out it assets in large quantities, it causes a depreciation in the value of the asset leading to a bearish or downtrend movement of the asset and thus affects the small investors who owns a smaller quantity of the asset.
Will we be able to take advantages of the existence of the whale that is so feared?
To me, the existence of whales comes as a double edge sword, either to depreciate the value leading to a bullish or to increase the value leading to bearish.
Taking advantage of the existence of whales depends on if it is driving the value of digital asset in a bullish manner. How does this happen? When whales invest more by buying and owning much quantity of the asset, it causes the value of the asset to rise...bringing in the law of demand and supply into play. This gives us an opportunity to earning more as small investors because the price of the asset will be moving in an uptrend direction (bullish).
Even as the whales which are feared by the small investors may lead to bearish in the reverse case, It existence can also be of great advantage. Taking advantage of whales existence depends on our being able to predict the value and also follow up the market trend of the asset so as to gain from it bullish trend caused by whales.
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)
According to coinmarketcap, the top 10 coins are as shown below in the screenshot
[image source](screenshot from coinmarketcap.com)
For this question, I will be using the Zcash cryptocurrency (which is not listed among the top 10 cryptocurrencies)
Below is a market chart showing the daily tradings of Zcash/USD. Within the months of February and March.
Accumulation phase: Looking at the chart above, using the Zcash crypto currency, we can see the accumulation phase were whales started buying and selling in small quantities from January to February. During this time, the effect was not that felt on the value because of the smaller assets whales traded on, this is why the trend is in a flat movement.
At the end of February, there has been a dramatical change in the movement of the trend caused by the whales and this phase is known as the absorption phase.
In the Absorption phase otherwise known as the uptrend, whales started buying and owning the Zcash in larger quantities without selling out. This act lead to the low circulation of Zcash in the market and thus caused an increase in the price value of Zcash creating a bullish in Zcash.
Distribution phase: After to the sudden uptrend move of Zcash in the chart caused by whales, it got to a point when whales started selling out Zcash slowly and also some of the small investors doing this at the same time while some other investors did not predicting the value of Zcash to move higher than that. This phase is known as the distribution phase, where the value of Zcash is not moving up or down but at a flat movement.
Downtrend phase: This is a phase were whales have almost sold out all it's large quantity of Zcash, they are almost done selling out their larger Zcash that stored, this led to the small investors selling their smaller quantities of Zcash leading to dominant sell of Zcash in the market. owing to this, the price value of Zcash has fallen causing a bearish in the crypto currency.
The Downtrend movement continues till when it gets to a price that the whales wants to start buying up to replace the quantity they sold off. This is how the cycle continues.
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 were a whale, the cryptocurrency I will choose to invest or trade on, aside the top 10 cryptocurrencies is "Zcash".
As a whale, why I will choose to trade or invest on a zcash is it's high volitility, as such will be easily manipulated. When a crypto currency is not stable, it can be easily manipulated to make profit.
As shown in the chart above, we can see how volatile the currency is and as such will be a better option to invest in as whale.
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)
Using the trading Chart for Zcash as shown below;
As whale, I will start buying and selling of zcash in small quantity as shown above in the accumulation phase
Later on, I will start buying and owning Zcash in larger quantities, this is where the value of zcash will increase in the crypto market. this phase is known as the absorption phase as shown above.
After I might have bought and owned enough quantity of Zcash, the distribution phase is where I will start selling my owned zcash to make profit as shown above. This is the phase I will start taking my profit until I sell off all my quantities of zcash.
After I might have sold off all my quantities of Zcash, the value price of zcash will move in downtrend as shown above leading to a bearish in zcash currency. This is how I will continue making profit repeatedly as whale trading with zcash currency.
Conclusion
Looking at the effects of whales played on the increase and also the decrease of asset value in cryptocurrency market, we can clearly state that whales are the drivers of crypto currency value.
As small investors, studying and following up the market trend of assets so as to predict the possible steps taken by whales is prior.
Identifying whales moves will help small investors from being trapped by whales and also to gain or make profit from their digital assets.
Thanks Professor @wahyunahrul for reading through my post, it was a wonderful and intetesting lessonwonderful lesson.