Crypto Academy / Season 3 / Week 1- Homework Post for Professor @wahyunahrul - Topic: Whales - The Driver Of Cryptocurrency Value. Post by @kayduke
Hello fellow Steemians, thanks to CryptoAcademy for the knowledge and opportunity given me to learn. It is my first time participating in a task from this community and I must say I am very glad and ready for this.
@wahyunahrul, thanks for the very insightful lesson on “Whales”, I call them the shakers and movers of the crypto world. This is my submission on the homework task you left for us to do.
Cryptocurrencies were supposed to be a decentralized system where nobody has control over what happens on the system but interestingly some individuals, sometimes a group of individuals have gained some control over the system. They are called WHALES.
Whales in simple words are individuals or a group of individuals who hold a large amount of coins of a particular cryptocurrency. They assume some power over the cryptocurrency they hold. Whales have the potential to manipulate the value of the cryptocurrency they hold by their holding or selling decisions. Whales have been tipped to be behind the fluctuations with Bitcoin lately. Talking about Bitcoin, industry data suggests that around 13% of all Bitcoin is owned by just some 100 individual accounts and these are the Bitcoin whales.
1. Why small investors fear Whales?
The crypto market rides on the popular Economics demand and supply rule where, an increase in demand where supply is constant shoots prices whereas an increase in supply where demand remains constant causes prices to fall. When whales invest highly in a particular cryptocurrency, the price shoots up and that is when small investors also go in to buy same. The Whales hold the coin for a while, make their profits and later begin to sell the coin slowly until the coin eventually loses its value. Small investors usually don’t realize the whale effect on prices so they just buy the coin only for it to lose its value in a short time. In the nut shell, small investors fear Whales because of the control they have over the market and their ability to make a coin valuable or not by their actions.
2. Will we be able to take advantage of the existence of the whale that is so feared.
We can make gains from the existence of whales in the crypto market. To do this, we first have to understand whale behavior and study the movement in the price of the cryptocurrency carefully. In studying the movement, there are 4 phases Whales take the coin through before it loses its value.
The first is the Accumulation stage. Here, the whales buy and sell moderate amounts of the cryptocurrency so there is no significant change in the movement. The line still remains flat so we can hold but not sell the cryptocurrency yet and even buy more and hold.
The next phase is the Uptrend stage, where the whales start buying the crypto in large volumes so you see there is a dominant green color in the chart. Price of the cryptocurrency begins to go up at a very fast rate so you see an increase in your crypto value too.
The third phase is the Distribution stage, the Whales start selling the coin slowly because they have made their profits and are getting ready to drop the coin. It is here you learn from your bosses – the Whales, and sell yours so you make profit too.
The final phase is the Downtrend phase, sadly this is where small investors realize the Whales have sold almost all the coins and it is gradually losing its value so they quickly try to sell theirs and they make little or no returns on their investment.
Also, we should consider not putting all our eggs in a single basket. We should learn to diversify risks and invest in different cryptocurrencies.
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.
At the time of doing this work, this was the top 10 cryptocurrencies on CoinmarketCap
I will be working with TRON (TRX) in analysing the whales effect on a cryptocurrencies. At the time of doing this work, TRON ranked 25.
Below is the chart for a year period.
From the chart, Accumulation was between September last year until the price began to go up somewhere around March-April this year. The price was just about $0.02-$0.03 through this period. This was where the whales were preparing to launch an attack.
Early May, the price shot to $0.13 and even made it to $0.16 at some point. This was the uptrend season, where the Whales bought huge volumes of Tronx which then increased demand with a corresponding increase in price. This is a whale effect because the increase in price happened in a short space.
After reaching their targeted profits we see, the wave remain flat at the top which means we've entered the distribution stage. Here the whales begin to sell the coin slowly and you see the value begin to drop.
The final phase is when the Whales have sold almost all of their coins so you see the value drop sharply and this is where small investors also hurriedly sell theirs too. This is the downstream stage. The coin's value drops to $0.2 and this is as a result of excess supply because everyone wants to sell off the coin to at least make some returns. The whales will come back to buy the coin if the price is favorable and the cycle repeats itself again.
4. If you are a “Whale”, what cryptocurrency would you choose to invest or trade.
When I posses the power of a whale, the cryptocurrency I am most likely to invest in is Bitcoin Cash (BCH). It is ranked 12 and was around $517.03 as at the time I did this work.
The first reason I will want to invest in this coin is the name.
The name already suggests and make it appear like an alternative to the largest cryptocurrency, Bitcoin so it will quickly be in the trends when I start buying heavily and causing an increase in price. Again, it is believed that it provides faster transactions, low fees and better scalability than Bitcoin. It is one that is volatile too which makes manipulation easy for a whale. Bitcoin Cash is also one of the very strong Altcoins with the potential to do very well in the near future.
Maybe I’m a whale already and giving you a tip on this cryptocurrency, are you going to be smart and start buying this coin already?
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.
Buy 1, will be the Accumulation stage for me where I'll be buy a sizable amount of the coin sell so as to set a base before I launch the attack.
At Buy 2, I am entering the upstream phase where I'll buy a huge volume of Bitcoin Cash to shoot the price and influence more investors. From the chart, I'll be buying the coin around $500 and wait for the price to go up.
I will begin to sell off the coin when it is valued at over $1200, there I have made my profits and ready to drop the coin. I am making over a 100% profits and that is fine for a generous whale like me. This is the distribution stage.
I will watch the value drop again and will most probably start the cycle again.
6 Conclusion
It is an undeniable fact the value of cryptocurrencies is largely influenced by whales. We've seen Whales to be individuals or a group who hold huge volumes of a particular cryptocurrency and their actions to either hold or sell influences the crypto market. They are profit oriented and very tricky sometimes. It looks like they have a perpetual existence as long as there's cryptocurrency so as small investors, we can only try to understand whales behavior and follow the graphs closely so that we can also cash out when the whales are harvesting too. Remember, if you can't beat them join them.
Thanks @wahyunahrul for this insightful and interesting lecture. I can't wait to have the next.