Whales are individuals or entities that hold large amounts of cryptocurrencies. 🐋 Often, these whales started their investments when cryptocurrencies were worth very little, investing relatively small sums that, over time, have turned into significant fortunes due to the exponential rise in prices. 📈
Impact of Whales on Liquidity💥
Large Market Participation: Because whales hold a significant portion of the total supply of some cryptocurrencies, their influence on the market is considerable. If a whale decides to sell a substantial part of its assets, it can flood the market with supply, outstripping demand and causing a sharp drop in prices. 📉
Difficult Mass Sale
Whales would face difficulties if they tried to sell all their assets at once. The market's limited liquidity means there are not enough buyers willing to acquire large amounts of cryptocurrencies without significantly reducing the price. This creates a scenario where mass selling is impractical without causing a steep depreciation. 🛑
Virtual Wealth
The enormous wealth of the whales is largely 'on paper'. If they attempted to convert a large portion of their cryptocurrencies into cash, the lack of liquidity could reveal that the realizable value is much lower than what market quotes suggest. 💸
Crisis of Confidence
If investors realize that whales cannot liquidate their assets without collapsing the market, this could erode confidence in cryptocurrencies. The perception that the cryptocurrency market is a bubble that could burst at any moment might lead to a massive withdrawal of funds. 🚨
Systemic Risk in the Crypto World
A mass sell-off attempt by a whale could trigger a chain reaction. Other investors might panic and try to sell their assets as well, which would amplify the drop in prices. ⚠️
Disconnection between Nominal and Real Value:
The disconnection between the nominal value of cryptocurrencies and their realizable cash value could create a liquidity crisis. In such a scenario, investors trying to withdraw their funds would find that there is not enough cash available to pay everyone, which could lead to a market collapse. 💣
