Crypto Academy / Season 3 / Week 1 - Homework Post for @wahyunahrul -WHALES THE DRIVER OF CRYPTOCURRENCY VALUE.
Am happy to be part of your class @wahyunahrul. The class was very interesting, and the homework was really simple, hard although, but you simplified it with your details explanations.
Homework Task
1). Based on the understanding that you've gained from this class, explain why whales are so feared by small investors?
2). Will we be able to take advantages of the existence of the whale that is so feared?
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)
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.
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)
- Conclusion.
ANSWERS
##1). Based on the understanding that you've gained from this class, explain why whales are so feared by small investors?
A whale or should I say a crypto-whale is a person/group of people who owns a large number of cryptocurrencies and has great dominance in the cryptocurrency he/she holds.
An individual who hold large amounts of coins of a certain cryptocurrency are known as whale in cryptoworld. As they hold large amounts of coins, they become powerful enough to manipulate the valuation of the said cryptocurrency.
Whales, normally, put a massive sell order on the books that is lower than all of the other sell orders in the market. This adds volatility in the market, following the prices fall and panic chain reaction.
So back to the question. Why whales are so feared by small investors?
Whales are the dominators of cryptocurrencies they own, so they can do anything they want with their coins but it has an effect on the smaller investors holding that same coins
A whale can decide to sell large amount of coins he own, and this have a very big effect, the value of the cryptocurrency will decline and will make the smaller investors to sell as well so they won't go at lost.
Here is an example. Imagine the price of a particular coin is $10,000 and some of that of the whales put in big sell orders, well the price goes down and is leaded by the many small people who panic and sell.
Then, when the prices goes down to say $9,000, the whales buy back their coins. Note, and every time they do this, they increase the number of coins they own, giving them further control and power over that coin.
So, to say whales are more feared by small investors, because they have fuller control and power over the same cryptocurrency they also own.
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##2). Will we be able to take advantages of the existence of the whale that is so feared?
Yes. We can be able to take advantage of the existence of the whales.
The whales or should I say the crypto-whale through the impact they've made on the cryptocurrency world, we the small investors can take advantage of the whale.
The activity of whales can have a major impact on the cryptocurrency markets, including individual crypto prices and market capitalization. When whales make trades, they often do it in millions of dollars. These massive sell or buy orders may lead to sudden and significant price changes.
When a massive buy order is placed, it can move the price of a specific cryptocurrency way up because it sends a signal to the market that the particular asset is in higher demand.
Basically a wise small investor (with the experience of having loses when whales often sell huge amount of their coins), will sell his coins to have more profits than before. Because when whales often buy huge amount of their coins, the coins increase in price.
And also when whales create a massive sell order, the price can go in the exact opposite direction because it sends the opposite signal to the market.
Also a wise small investor with the same knowledge of experience will buy more coins, cause he knows it will increase again. Because when whales often sell huge amount of their coins, the coins usually decrease in price.
Basically, when whales make major buys or sells, they can influence the market which then causes a cascade of buy or sell orders.
##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).
Note: this chart occurred at November 24th to December 2nd 2020.
The green line is the price.
The purple line (1 000 000-10 000 000) (1M-10M)coins.
On Nov 24th the price was above 3.525 approximately 3.612 in the chart.
Then on Nov 25th the price increased to approximately 3.696 below 3.782 in the chart.
Then on Nov 26th the price decreased to approximately 2.665 below 2.752, and it decreased again to 1.101.
Then on Nov 27th it increased to approximately 2.554 below 2.752, again it decreased to approximately 2.194 below 2.273 in price.
Note: all the price rate from Nov 24th-Nov 27th are whales holding the amount of 1 000 000(1M) coins.
Then moving on to Nov 28th it increased to approximately 73.453 below 75.632 in the chart.
Then on Nov 29th it increased again to approximately 76.784 above 75.632 in the chart.
Then on Nov 30th it increased again to approximately 87.236 above 86.616 in the chart.
Then on Dec 01st, the process occurred four times. First it increased to approximately 91.475 above 90.278. Then it decreased to approximately 79.867 below 82.955. Then it increased again to approximately 91.586 below 93.94, and finally decreased to 86.616 in price.
The continuous increase in the number of large Litecoin transactions corroborate this theory (chart) that large investors are the ones driving Litecoin price which remains considerably stronger than many other minor coins.
##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 were to be a whale (although I hope to be a whale someday...) l will choose the "LITECOIN". First.
What Is Litecoin?
Litecoin is a cryptocurrency that was founded in 2011, two years after bitcoin, by Charlie Lee. Measured by market capitalization, Litecoin is the ninth-largest cryptocurrency.
Litecoin has a potential of long-term holding. Similar to investments in any type of currency, investors are speculating that Litecoin will build relative wealth over time.
So with that information will give me the confidence to put all my assets into the currency to make huge profits and become a powerful whale in the future.
Litecoin is a decentralize virtual currency, which means it is not governed by a central authority. Litecoin's network offers instant, near-zero cost payments that can be conducted by individuals or institutions across the globe. And also, Litecoin use the proof-of-work (PoW) algorithm in order to secure their networks.
Litecoin can be used as an avenue for paying people anywhere in the world without an intermediary having to process the transaction.
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##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)
As a smart whale, I will start buying from Nov 26th and hold it, (and was very low in the chart), because it will increase again. And sell at Dec 01st (cause it was very high in price) for more profits to come.
Nore: the red arrow is when I Wil buy and the green arrow is when I Wil sell.
##6). Conclusion.
Whales are an incredibly significant part of the cryptocurrency environment. Their actions can create price swings up or down which can cause strong reactions in the market. Some whales make frequent trades that are high volume, and many others simply accumulate as many cryptocurrencies as they can and hold.
Regardless of whether whales are holding or trading, they tend to affect the market either way. While hodling creates scarcity, active trading creates volatility.
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