Small Crypto Investors Got Eaten Like Krill by Whales

Cryptocurrency has been all the rage in recent years, with more and more people jumping on the bandwagon and investing in digital assets. However, recent reports suggest that small crypto investors are being devoured by large investors or, as we usually call them, whales.

According to a Bulletin N69 issued by BIS, the median crypto investor lost half of their invested funds in December 2022. They say that most cryptocurrency investors have lost their initial investment. The entire set of information was gathered between August 2015 and December 2022. According to the report, this significant loss has been attributed to the actions of whales, who have been manipulating the market to their advantage.

Whales are people or businesses who possess substantial cryptocurrency holdings. By speculating on cryptocurrencies, these market participants have the potential to influence the market.

Small investors, on the other hand, control comparatively less cryptocurrency and lack the clout to swing the market. As a result, when whales begin to buy or sell, the market may become out of balance, and small investors may suffer huge losses.

Numbers will tell more

Experts from BIS looked at data that showed large investors of bitcoin, the most liquid cryptocurrency asset, quickly sold their holdings while small investors only bought it. In other words, when the price of BTC was growing, new market participants entered the market and bought little amounts right away, but at a high price. Thus, the average investor would have lost $431 in December 2022, or about half of the $900 they had invested when they first entered the market, statistically speaking, according to the BIS.

How can whales manipulate the market?

The practice of “wash trading” is one of the ways that whales can manipulate the market. To generate the illusion of market activity, this includes continually purchasing and selling the same asset. In turn, whales can control the asset’s price in this way, leading small investors to lose money when they panic and sell their holdings.

Furthermore, via “pump and dump” strategies, whales can also influence small investors. This is boosting the price of a cryptocurrency artificially by disseminating rumors or upbeat news and then selling off their holdings at the inflated price. For tiny investors that invest at the price high, this might result in substantial losses.

However, it seems that governments and people are still treating cryptocurrencies differently. While some governments are starting to regulate the sector, others are still unsure of their next steps.

Nonetheless, a lot of individuals are still attracted to the advantages of cryptocurrencies, such as partial decentralization and the absence of intermediaries in transactions. Important to note that the risks of cryptocurrency investing are also becoming increasingly apparent, especially as huge investors start to manipulate the market.