Blockchain
The Whale Effect: Decoding Exchange Ratios and Their Impact on Cryptocurrencies
The cryptocurrency market is still in uncertain hands and there is no relief despite the Fed’s decision to keep rates unchanged. While there is short-term uncertainty, experts are generally optimistic about the long-term growth of the cryptocurrency market. However, news of increased trading whale activity is disrupting cryptocurrency prices.
As per CryptoQuant, Exchange Whale Ratio data sheds light on the activity of large traders, or “whales,” on cryptocurrency exchanges, particularly regarding the top 10 inflows compared to total inflows over a 72-hour period. When this ratio approaches 100%, it indicates that whales play a significant role in determining price movements, potentially leading to greater volatility.
Altcoin is in action with the Crypto Whale
This shocking whale activity is causing unrest in the crypto space. Whales add liquidity to the market with large purchases, allowing panicked sellers to trade without depressing prices. However, this metric for various cryptocurrencies reveals interesting patterns.
For example, Bitcoin shows high whale dominance, with 96% of the inflow attributed to the top 10 addresses. In contrast, Ethereum shows a much lower ratio of 11.45%, suggesting a more balanced inflow of funds.
Some altcoins, such as NMR, ENJ, YFI, and CHZ, exhibit similar whale dominance to Bitcoin, indicating significant activity from large investors. On the other hand, altcoins such as AAVE, SHIB, and MATIC demonstrate a more equal distribution of funds among whales and small investors.
The lower inflow of funds from whales into some altcoins could be attributed to factors such as decentralized exchange mechanisms, which are particularly popular in second-layer solutions such as Ethereum. Additionally, Ethereum’s role as a smart contract platform expands its trading ecosystem beyond centralized exchanges, potentially reducing whale activity on these platforms.
Advice for investors
Crypto’s continuous monitoring of the Exchange Whale Ratio can help investors gauge potential price volatility in the market. By understanding the influence of whales on trading activity, investors can make more informed decisions regarding their cryptocurrency holdings.