Crypto Academy / Season 3 / Week 1- Homework Post for Professor @wahyunahrul - Topic: Whales - The Driver Of Cryptocurrency Value.

After taking part of the lecture, I’ve decided to also engage in the assignments given which the questions are stated below:

• BASED ON ONE'S UNDERSTANDING OF THE LECTURE, EXPLAIN WHY WHALES ARE BEEN FEARED BY MANY SMALL INVESTORS

• WILL WE BE ABLE TO TAKE ADVANTAGES OF THE EXISTENCE OF WHALE THAT'S SO FEARED

• FIND AN EXAMPLE OF A WHALE'S CYCLE ON A CRYPTOCURRENCY CHART AND DO A DETAILED ANALYSIS OF THESE PHASES

• IF YOU ARE A WHALE. WHAT TYPE OF CRYPTOCURRENCY WILL YOU LIKE TO TRADE ON

• DO A KIND OF RESEARCH AS A WHALE WITH A PHASES ON THE CHOSEN CRYPTOCURRENCY,
  SHOW WHERE YOU WILL START TO BUY AND HOW TO MAKE PROFIT

Question 1:- BASED ON THE UNDERSTANDING THAT YOU'VE GAINED FROM THIS CLASS, EXPLAIN WHY WHALES ARE SO FEARED BY SMALL INVESTORS?

Whales in crypto means individuals that hold large amount of coins of a particular cryptocurrency. As these individuals hold large amount of coins, they are able to control and manipulate the valuation of cryptocurrencies. These people can make the price of cryptocurrencies rise at any point in time and at the same time they can also make the prices fall at any point depending on their actions.

Why do small investors fear them?

The rise and fall of cryptocurrencies is similar to the law of demand and supply. When the demand for cryptocurrencies rises, there is limited stock of coins hence the price goes high. Conversely, when there is unlimited supply of cryptocurrencies and the demand is comparatively less, the price of the assets will definitely go down.
Below is a screenshot of how a demand and supply curve works.

source

The decision of a whale to buy or sell a coin can affect the market seriously.

• Buying section by a whale:

When a whale decides to buy cryptocurrencies, he buys them in large quantities therefore causing scarcity of coins in the market. This is referred to as Artificial Scarcity. This makes the price of that particular currency rise very high and only few investors can afford to buy at that rate. This period where the whales decides to purchase in bulk is referred to as the “bullish period”.

For example, chief economist Philip Gradwel reported that some whales bought 77,000 bitcoin last week, an amount currently worth just above $3 billion.

source

This action will result in huge rise in price of Bitcoin.

• Selling section by a whale

Whales can decide to sell the coins at a slightly increased price. The whale will still make huge profit out of this because his coins are in bulks and very plenty. This will however affect small investors as the small rise in price won’t give them any profit. When the whale place his large assets in the market for sale, that particular coin increases in stock in the market thereby reducing prices of the coin. The whale will still make profit out of this but the small investors will suffer that. When the small investors decides to sell their assets at that time, the whale will buy them at lower prices as well. This situation is called the bearish situation.

QUESTION 2: WILL WE BE ABLE TO TAKE ADVANTAGES OF THE EXISTENCE OF WHALE THAT'S SO FEARED

There is no way we can be smarter than the whales or have more resources than them. The only way we can live with them is to find a way to adjust to their moves or predict their moves. When we predict them well we won’t fall for their tricks and we can also make profit with them.

We learned in the lecture that whales moves occur in four stages; Accumulation, distribution, uptrend, downtrend. Only the whales know when they will make either of these moves. But why we can do is to study the market carefully to predict a move or follow newspapers to be alert when a move has began or is about to start.

For example we can use the uptrend and downtrend movement of steem to predict the move of whales.

Screenshot: coinmarketcap

Investors can study the chart above carefully and use it to predict the moves of the whales and invest accordingly. When steem is at the point marked( the lowest point), investors can buy more steem. This could mean the whales have released more steem into the market hence less demand and less price.
When the steem then gets to the highest point as indicated above, it means the price is very high meaning there is high demand for steem. This could mean the whales have bought more steem and not ready to release into the market, hence not a good time for investment.

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 ten ranked cryptocurrencies according to CoinMarketCap are below:

Screenshot: coinmarketcap

By exploring the cryptocurrency solana which is not in the top 10, I realized that whales operate beyond the top currencies.
Below is a market chart showing solana:

Screenshot: coinmarketcap

• From the chart above, accumulation period was between May’ 20 and January’ 21. The whale was using this period in preparing to attack the market. Within this period the price was constantly between $0.00 and $0.05.

• After January 21, the price began to rise massively. It shot to as high as about $50 in may 21. This period between January 21 and may 21 is when the whales decided to act on the market. Probably the whale decided to buy more solana coins that lead to increase in demand hence the increase in price. This period is called the uptrend period of the solana currency.

• When it reached it's highest point which is about $50, you can see that it stayed there for a period of time before it started dropping. This period is called the distribution period. This period doesn’t last because everything begins to change when the whale act on the market again.

• The final phase is when the price begins to drop. This is when the whale decides to sell the coins thereby increasing the supply in the market. The price of the coin drops rapidly within this period and investors will also rush to sell their assets. The period is termed as the downtrend period. The coin will drop to the lowest point and the whale will come to buy again and the process repeats over again.

Question 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.

Assuming I’m a whale, the cryptocurrency out of the top 10 ranked ones I will prefer to Invest in is the litecoin.

Screenshot: coinmarketcap

One of the major factors whales consider before investing in a cryptocurrency is the volatility of the coin. The more volatile a coin is, the higher the chances of making huge profit with it.
I therefore chose the litecoin because it is one of the most volatile coins you can see out there.

Question 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)

Like I said earlier high volatility is the reason I chose the litecoin.

Screenshot: coinmarketcap

Looking at the chart above, the accumulation period started from 2014 and only started to rise when approaching 2018. Because the litecoin is very volatile, when it begins to rise it goes very high before it begins to drop again. So based on the chart I’ll buy the coin in 2014. This will make me to be able to accumulate more coins up to 2018 when the coin rises. This will make me gain much profit when the coin rise very high around 2018.
This coin also drops very fast due to it’s volatility. So immediately the coin shows a sign of decline in the chart, (around 2019 in the above chart) I will remove my profit and begin to study the chat again.

Conclusion

Whales design a strategy that will favor them alone to sustain them and make them rich. It will continue to work for them because they control the market. So we as small investors must adapt to them and try to predict their moves so that we can also make profit out of these cryptocurrencies and also cut some losses.

Thank you professor @wahyunahrul for this educative lecture.