Some thoughts on whales in the crypto markets
A question came up on Whales in the crypto markets today.
Specifically, their actions and how normal folks should respond.
Here are some thoughts that came about as a result:
Long-term holders will likely benefit. Short-term volatility shouldn't affect them, and whales imply a larger total pool and ultimately higher prices.
Whales have to be considered when using stop orders. Whales can't see the stop orders, but they know they are there.
Triggering stop orders adds a boost for a Whale in the direction they are trying to move in. GDAX claimed that a multimillion dollar market sell order caused a snowball leading to the ETH flash crash, and multimillion is nothing in larger markets.
See: https://blog.gdax.com/eth-usd-trading-update-5d8142b5bdc1
This is why I always advocate using limits on our stops. Limits allow us to get out of the snowball's way. :)Liquidity is an interesting one. It will be interesting to see how centralized/decentralized liquidity pools shape out as the market grows and matures. Many small exchanges/liquidity pools should make the markets more resilient to whales. If no large targets exists for the whales, they will be deterred and won't care to play in puddles.
In summary:
Whale offense:
- Hold on for the long-term.
Whale defense:
- Use limits.
- Consider using multiple exchanges/liquidity pools (diversification).
- Keep an eye on decentralized exchanges.
Let me know what you are thinking.
deeplizard
Upvoted and followed. Some of the whales are benevolent, which is cool. However, the market manipulation that goes on in some crypto is egregious. Cool post.
Very much appreciated!
You made me realized that the post does lean in the negative direction.
You have anything in mind in terms of their benevolence?
I don't know if I have much to say in terms of the benevolence of whales except they probably are better prepared resource-wise to defend price levels and projects. However, having an outsized voice can be a bad thing too. And any kind of price manipulation is problematic in the long-run because it hollows out the "truth" of any price. Thanks for replying!
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