Michael Saylor’s Strategy bought 4,225 Bitcoin (BTC) worth $472.50 million! BlackRock just bought $394.7 million worth of Bitcoin and $158.6 million worth of Ethereum (ETH)! Metaplanet acquired 797 BTC! These headlines have hit us many times, often at least once a week. But have you ever thought why this news matters and how it counts? Does it matter when big corporate whales buy a huge amount of cryptocurrencies?
How do big whales make big waves?
Big whales catch big fish in the crypto ocean, such as Bitcoin and Ethereum, creating a seaquake both in optimistic and pessimistic ways. One simple answer that every crypto nerd knows is market awakens! price surges! A significant fact that has the power to substantiate the impact of huge whales in crypto. But, there is more to the story! Several other multiple attributes push the market to dip and rise.
Bulls start thrusting horns upward: Key positive effects on the market
Investor confidence in an investor opens eyes
Huge acquisitions of cryptocurrencies like Bitcoin and Ethereum can increase investor confidence. The inner thoughts of individuals and institutions wake up as they recognize crypto is a valuable asset to invest in.
FOMO takes charge as demand increases and price scoops up
Typically, when a massive number of cryptocurrencies are purchased, the circulating supply of the coins decreases, leading to increased demand. As in any traditional market, when demand for a product goes up, the price of the product also rises. Likewise, the crypto market also reacts to the increased buying demand, triggering a potential bull run.
A wave of Fear of Missing Out (FOMO) can also happen in the market as buyers tend to feel they are missing the opportunity to buy crypto.
More institutional adoption swims into crypto
Increased adoptions from giant institutions and public companies such as Michael J Saylor’s Strategy, asset manager BlackRock, and Bitcoin treasury company Metaplanet can drive other institutions to gobble up cryptocurrencies. Besides these investment giants, public companies Tesla, Coinbase, Block Inc., and Hut 8, and institutional investors such as Fidelity Investments, ARK Invest, and Grayscale also play a leading role in driving the crypto market up.
Bears start swiping paws downward: Key negative effects on the market
However, bullish sentiments can also emerge in response to huge whales accumulating huge amounts of crypto.
Centralization in a decentralized world
As institutions, public companies, and fintech firms hold massive portions of cryptocurrencies, chances are high that these whales can likely navigate the market direction and govern decisions, gaining centralized power concentration.
Liquidity squeeze as supply decreases
Hoarding more crypto means removing liquidity from exchanges, making new entrants and small traders to buy crypto at a higher price.
Unexpected sell-offs cause chaos
What if the giant companies sell their crypto? A market crash, panic selling, due to a price dip.
Security breaches and regulatory seizures put crypto holders in vain
Unexpected hacking on crypto holding companies or new rules can affect the broader crypto market. Most of the corporate crypto holders are less prone to exploits, but any unfortunate breaches can cause millions worth of loss.
So, why do big corporate whales accumulate crypto?
Massive crypto hodlers pile up cryptocurrencies as a hedge against inflation, a long-term store of value. This works especially when the value of fiat currencies drops, and investors seek crypto as a good means to preserve corporate treasury. And, most importantly, big firms and normal investors believe in high-risk, and earn high-reward, like how several investors bought Bitcoin in 2010 and became billionaires now!
Another interesting reason is, firms can diversify their balance sheets, relying on crypto rather than adding cash, bonds, and other traditional assets as a treasury strategy. Eventually, cryptocurrencies are part of Web3. Building their space in Web3 and technology means these firms are bolstering their position in the future of innovative technology.
