Crypto Academy / Season 3 / Week 1 - Homework Post for Prof @wahyunahrul

Hello everyone. This is my homework task submission for Season 3 / Week 1 / Beginners Level Course: Whales - The Driver of Cryptocurrency Value

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1. Based on the understanding that you've gained from this class, explain why whales are so feared by small investors?

Whales are the largest known living mammals on Earth. They rule the ocean bodies. Similarly, in the world of cryptocurrency, there are some individuals or groups who own large units of a cryptocurrency and exerts his influence on the price of that cryptocurrency. They are popularly termed as ‘whales’.

The values of cryptocurrencies will fluctuate as per the market demand and the amount of tokens in circulation. If demand for a crypto token increases, its price will rise. On the contrary, if there are more sellers than buyers, the value of that token will fall. This rise and fall of crypto prices is a common phenomena.

However, small investors are mainly affected when whales manipulate the valuation of a specific token. Whales (user who owns large sum of a cryptocurrency) put their orders in bulk, be it buying or selling.

When a whale buys significantly large amount of a particular cryptocurrency, it will increase the price of that token. This is a good sign for small investors. Similarly, whales may sell off huge amount of a cryptocurrency thereby triggering volatility in market price of that token. This will cause tension among small investors because they witness the value of their invested money going down. They may sell off their tokens for low prices and as a result, whales accumulate more tokens at low prices.

Under these circumstances, we can say that ‘whales’ have ultimate control over price of cryptocurrency and so small investors (common users) fear them.

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

The answer is Yes.

Whales have a big influence over the cryptocurrency market price. They always try to outsmart small investors to earn profit. As small investors, we can analyse and monitor the significant movements of the whales so that we can minimize the damage or losses for us.

We can study the patterns of whales by studying the price fluctuations of the past. There are many sources nowadays that offer guidance on how to predict the upcoming moves made by whales. Therefore it is always advisable to learn the technical aspects of the market in order to lower the chances of being trapped by the whales in the cryptomarket.

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3. 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)

The top 10 ranked currencies at the time of writing this post are as follows--

^Source

It is impossible to predict the exact pattern of whale's cycle on a cryptocurrency chart. But after analysing different patterns of price fluctuations over time we can draw a general pattern of whale's activities and corresponding crypto values.

^{Screenshot of Trading View on Coingecko}

For the purpose of this task, I have taken the above screenshot showing the TRADING VIEW representation of Theta Fuel (TFUEL) cryptocurrency over a 4-hour time frame. So, here one candlestick will represent the value of the TFUEL coin for 4 hours. This token ranks at #48 at the time of writing this post. Lets understand the cycle below.

• The first stage is termed as the ACCUMULATION PHASE. As we can see from the graph, the fluctuation levels are relatively less. Here the whales trade (buy or sell) with insignificant volumes of token. So the price level of tokens remain low. But this phase indicates that whales are in a process of accumulating more and more cryptocurrency so that they can reap heavy benefit out of it in the near future.

• The next phase is the ABSORPTION/UPTREND PHASE. In this phase the whales start buying huge amount of cryptocurrency within a very less time frame. This causes the market price of the crypto token to peak up heavily, thereby attracting other investors small and big, so that they too buy the tokens. This uprising trend of the market is known as 'Bullish'.

• After achieving their targeted growth, the whales now begin to sell there tokens and generate profit. However, the small investors do not know this move and keeps buying tokens. So intially there is a horizontal movement of the graph where the sell made by the whales is matched by the purchase of tokens made by the small investors. This phase is known as the DISTRIBUTION PHASE.

• When the small investors come to know that the whales have already sold their tokens they panic and as a result, they also start selling their stake. So in this phase, there is a sharp dip in prices because the general trend of the market is 'Bearish' where everybody is 'Selling'. This is the DOWNTREND PHASE.

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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 am a "Whale", I would choose to invest in the token Aave (AAVE). It ranks #31 at the time of writing this post.

Why AAVE?

The Aave Coin started 2021 trading at $88.33. In the first half of February it crossed the $500-mark. From there on, it swung between $300-$500, ultimately hitting the peak of $631.36 in May.

The recent market crash also affected the value of Aave token as it hit a low of $184.80 on 27th June 2021. At the time of writing this post, the value stands at $238.97

So overall, it has been observed that this coin has high probability of volatility. And as a whale, it is encouraging when the market is unpredictable for small investors. I hope the future holds a very promising prospect to invest in AAVE Coin as a Whale myself.

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)

So as mentioned above, I would invest in AAVE Coin if I am a 'Whale'. Here's a brief analysis of the phases in which I would make my moves as a Whale to reap maximum rewards. So let's begin ---

^{Screenshot of Trading View on Coingecko}

• Accumulation: Now it's the start of July 2021. So as a whale, I would start accumulating AAVE tokens for low prices gradually and in small volumes. I will continue this for two-three weeks. (refer to phase A in pictographic)

• Uptrend: Around the third week of July, I will begin investing in large volumes of the AAVE token. This will increase the demand of the token and as a result its market value will rise. Now this will attract the small investors and they will be tempted to buy AAVE tokens. I will continue to engage in the trading of coins for nearly a month to keep the price soaring higher and higher. This is necessary to put the faith in the mind of the investors, that the value of the token will not fall very soon. (refer to phase B in pictographic)

• Distribution: Now after having reached the targeted growth in token value or even surpassed that, I will begin to sell the tokens by mid August and thereby yield a fair share of PROFIT. The investors on the other hand have no idea that the whale/whales have started selling their assets, so they keep buying tokens at such a high price. In this period, the whale's selling is matched by the investors' buying. So there is a stable flat graph. (refer to phase C in pictographic)

• Downtrend: Now after analysing the graph and token values, the investors can smell that the whale's have started selling off their stakes. So most of them panic and they let go their tokens for a lower price. (refer to phase D in pictographic)

Conclusion

To be honest, we cannot outsmart the whales in the cryptomarket because they possess huge volumes of the cryptocurrency. As small investors we need to take our time to study the previous patterns of whale movements and accordingly invest in cryptocurrencies. We need to stay close to their moves in order to minimise the losses. Also patience is key in order to gain reward in the cryptoverse. I take this opportunity to thank Prof. @wahyunahrul for presenting such a crisp and elaborate explanation of the topics. Indeed it was very helpful.

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