The past few months have proven to be quite exciting for those of us in the cryptocurrency space – and apparently it has been for the “bitcoin whales” also. One week bitcoin is reaching new highs almost daily, the next week Ether is reaching new highs and bitcoin settles a bit. The following week another altcoin comes out of the blue and seems to be the new buy deal of the day! So what do you do? Should you try to buy the dips, sell when it goes up, invest in a new altcoin?
I am relatively new to cryptocurrency, so there has been and is still much to learn. I’ve read a lot of articles opining on whether the new highs being reached represent organic market growth by natural buyers. I’ve also learned about “bitcoin whales” and the effect they have on the crypto-market. It appears that a “bitcoin whale” is an early bitcoin miner or investor that now has thousands of bitcoins. I understand that most are Chinese, and they would like to reduce their exposure to bitcoin – but not by getting into fiat currency where they’ll have poor returns and have to pay taxes. So, these “bitcoin whales” look for altcoins, and especially token sales.
Ah…so what’s the difference between and “altcoin” and a “token”? An altcoin is a bitcoin clone – a coin that has one utility, and that is to act as a simple store of value with limited other functionality, or no other functionality. Tokens can store complex, multifacted levels of value. Ethereum tokens are generated by a Smart Contract System, are highly programmable, and have multi-functionality as a result. Tokens are tecnically not “offered”, rather they are “generated”.
Bitcoin Whales’ Appetite for Tokens
So, why do the “bitcoin whales” look for token sales? Because if a token is released that will likely go up in value, it’s safer than having all your wealth in bitcoins. They’re bought if they look legitimate and appear to have a chance the price will go up later. The “whales” hope to hold for 3 to 9 months or so, then double their money and move on to the next token. Doing this allows them to diversify their portfolio and keep tax reporting and obligations to a minimum.
When a token is initially generated – and are bought up by these “bitcoin whales”, it effectively prevents natural buyers that support the project from buying tokens initially. The “whales” have so much wealth that they can close out a token sale, force the issuance of new tokens, and lock in their bitcoin price for several months. The “whale” doesn’t care what the token is, just as long as it looks legit. There is no interest in the actual project behind the token, they just look for some social validation and snap them up. Apparently, these “whales” are playing the role of underwriters, distributors if you will. The organization trying to raise money gets what they want, and the “whales” watch the price during the next year or so. The project reaches some milestones which increases the price, natural buyers come in to support it, the whales sell – and if the new buyers hold on for the long-term realized value they, too, see significant gains.
However – there are also “pumpers and dumpers” – who just buy all of a token sale to guarantee the price will go up. Once that happens, they dump and make a huge profit. The pumper has no interest in the token other than as a means to an end – and often the value of the token collapses shortly after everyone else buys. While there are some who tag every quick rise in price as a “pump and dump” – it’s far more likely most of this kind of manipulation is done by the “bitcoin whales” who don’t like to lose money at all – so they don’t sell all at once.
Also, there are plenty of tokens that don’t sell out, or reach their maximum – indicating that investors are being selective. Of course, those fast-sell-outs are the ones that make the news – and crypto trading and investing is in the news a lot more often recently. This fact naturally brings more and more buyers into the space, many that will be buy-and-hold investors, and some just looking to get in on the action and not miss out. Whatever the reasons, it does suggest that in general there are plenty of natural buyers entering the crypto-space.
The thing is, whether you’re a speculator or an investor – if you double your money or more investing in cryptocurrency, will you go back to fiat money? I would think not, because things are just getting started and there is a lot of money to be made. Remember back in the 90’s when people kept underestimating the Internet? Saying it would never be used by “mainstream” business or society? Those that just kept doubling down came out with mega compound returns, didn’t they?
So, has the time for creation of new “bitcoin whales” passed – probably not, at least where some of the emerging new altcoins are concerned. This technology is moving fast and new innovators are coming up with revolutionary ways to solve some pretty age-old problems. The innovation of the blockchain is changing entire markets, and causing ripples with central banks and the financial industry. Major investors are starting to take interest as this avalanche of growth spreads all over the market and around the world. Institutional investors, such as banks, insurers, pension funds, hedge funds and asset managers, are beginning to view bitcoin and its rival cryptocurrency ethereum as a new type of investment.
Despite being dismissed as a passing fad, bitcoin has been gaining in popularity and legitimacy – and emerging altcoins appear to be heading in the same direction.