Cryptocurrencies used to be the political symbol against fiat centralization in the hands of central banks. As we all know, and as Satoshi Nakamoto himself said, the problem with fiat currencies is that their history is full of breach of trust. Cryptocurrencies and Bitcoin, in particular, was designed to be the alternative to this problem. To give control of currency to the people.
However, as the cryptocurrency market has matured, now there is a lot more money inside the industry itself. And for that reason, the concept of decentralization has not been the main attraction point anymore to the crypto traders and enthusiasts. Many people say crypto is all about quick profit these days. So, is it true that crypto is just the whales’ game to chase quick profit? Let’s see.
Private Sales And The Reality Of Altcoin Market
To understand whether it’s true or not that the cryptocurrency space is conquered by whales who chase quick profit, first, we need to understand the reality of the altcoin market. Unlike Bitcoin, most altcoins that are popular today began from token sales. Ethereum, Polkadot, NEO, Cardano, all of them began from some type of token sale to early investors.
And tell you what, these early investors became very rich from these private sales. And of course, they are not just your typical VCs or whales that only invested in one project. Most of them are everywhere, even in newer altcoins that got launched this year.
That’s why the cycle has never been broken. They came with a fat amount of money, they told the new altcoin projects to raise the minimum investment amount (so only the whales could participate), and they got into the project at a very low token price. And when the project got into public sale or exchange, they benefited with 20x or even 30x ROI. They dumped the token, got into another promising altcoin, and repeated the same cycle.
This strategy has been proven to be quite effective during the bullish years, like in 2017 and 2020. Unfortunately, it also created a lot of wealth imbalance between the normies and the whales. The normies put a lot of risk by buying the tokens on exchanges or even public sale. Meanwhile, the VCs and whales could get at a very low price and put their capital at minimal risk.
The sad reality of the altcoin market is that majority of newer altcoins couldn’t really compete with the big projects unless they start their journey with a lot of capital. And whales that can provide them a lot of capital are the same whales that could make 20x-30x profit in a bull market, creating a huge wealth gap between them and the retail traders.
The Future Of Crypto In The Whales’ Hand
The thing is that many whales are also able to dictate the future of the crypto industry due to their enormous purchasing power. Back in 2018, during the crypto winter year, many crypto media speculated that the whales dumped their cryptocurrencies to chase quick profit in the futures market such as Bitmex.
The conspiracy theory was like this. The whales opened a short position on the crypto futures platform. They bought Bitcoin OTC, and they got big discounts due to their purchasing power. And then, they dumped those BTCs on the spot market. Because the futures market follows the spot market price, they benefited greatly from the crypto price falls. They did it over and over again until some whales decided there were not enough counterparties anymore in early 2019.
Of course, the bearish trend didn’t last forever. 2020 has been a good year for BTC and altcoins so far. The big traders sometimes go long as well in futures, it’s always speculative, and they often try to predict each others’ movement. However, the point is that whales can decide the future of crypto prices and industry just because of their purchasing power.
The fact that 2018’s crypto winter happened because of whales’ greediness to chase quick profit shows you that even the biggest crypto believers can sometimes bet against the market if they think it makes them a quick profit.
Whales’ Faith In Non-Crypto Industries Also Matter
The thing is that whales and the biggest crypto HODL-ers often have other investments as well in more traditional industries. They don’t just go all in Bitcoin or Ethereum. Many of them also invest in the real estate market, stock market, or even physical gold.
This is why whales’ faith in non-crypto industries also decides the future of crypto. For example, if many crypto whales believe that fiat currencies’ futures are threatened by the current COVID-19 pandemic, they might not want to cash out their crypto anytime soon. And that lack of selling pressure would definitely help crypto prices and industry to grow.
To say crypto is just the whales’ game might be partially correct but keep in mind that many of the current crypto whales also believe that crypto has a better future compared to the traditional market. That’s why the industry has been growing in the time of pandemic, where many traditional businesses have been declining.