The term Bearwhale exists, however only in the Crypto World.
A bear whale is an individual or entity that possesses a considerable amount of digital currencies and manipulates their value to take advantage of market conditions.
What is a Bearwhale?
A Bearwhale is a nickname given to an individual or group of traders that hold a significant amount of cryptocurrencies and uses their large account balance to influence the market.
By selling large amounts of their holdings at once, they can drive down prices. Creating in this way an opportunity for them to purchase the same assets at a lower better price. This results in the bearwhale making a profit while also causing a market downturn for other traders.
Additionally, Bearwhale can also use other strategies like short selling, options trading, and also by spreading FUD (fear, uncertainty, and doubt) to achieve their goals.
Why is it called a Bearwhale?
In 2014, the anonymous trader known as BearWhale had an amount of Bitcoin around 30,000 at a cost of 500,000 dollars worth. This enigmatic person decided to put all of it up for sale at once.
This large sell order caused the market to be flooded with Bitcoins. This in turn caused the price to drop dramatically. The $300 per coin price point was considered a low price at that time.
The immediate effect of BearWhale’s actions was that many traders panicked and started selling their own Bitcoin holdings.
This created a vicious cycle of selling and price decline, which lasted for hours. This event not just affected the traders and investors but also the mining industry at that time. That is because mining Bitcoin was not profitable when the price dipped like this. As a result, some miners had to shut down their mining operations.
The appearance of a BearWhale in the market can be a major event for traders and investors. This is due to that fact that a large volume of cryptocurrencies being sold can significantly impact the market price.
What happened to the Bearwhale trader?
In 2017, the unknown Bearwhale trader shed light on the unresolved mystery of the Bearwhale event in 2014. By sharing his story via a Reddit post, where he identified himself as the Bearwhale person, he explained in more detail the reason behind his actions.
Before the sale, he held onto a large amount of Bitcoins (around 36,000) that he purchased at a price of Bitcoin of around $8 with his life savings. He accumulated significant wealth (around $37 million) when Bitcoin was reaching its peak during the Mt.Gox bubble.
However, the trader lost faith in the long-term potential of Bitcoin. The main reasons were due to the ongoing scaling debate and the fear that a small block size would hurt the protocol. Hence, why he decided to unload his coins quickly. He chose Bitstamp as the exchange, placed a sell order of 30,000 Bitcoins at $300/coin, and signed message as cryptographic proof of his ownership.
The large sale had a significant impact on the market, causing panic selling among other traders. This resulted on creating downward pressure on the price.
The BearWhale revealed that he made the decision to sell quickly and didn’t spend much time working on the order and took a loss as a result. But he also stated that he did not sell in fear, he just believed in the ‘small blocks are bad’ narrative and also he had paid taxes on the gains.
Nevertheless, the market soon recovered from that event. The bitcoin traders and the community rallied to buy up his coins, and the price jumped back up in bitcoin markets.
Lessons learned from Bitcoin ‘Bearwhale’
Don’t overestimate the knowledge and/or skill of others
Many people assume that those who successfully manage a sector must inherently possess knowledge that others do not. However, this is often not the case. For instance, BearWhale – the early adopter of Bitcoin- made a single large sell order of Bitcoin in 2013, causing its price to dip drastically. Although some believed he had special insight into the crypto market, it was simply that he wanted to quickly complete the sale with minimal attention and effort invested.
Likewise, when considering ICOs and their teams’ abilities to handle finances, many believe they necessarily have experience in trading. However, such expertise may not exist within the project’s core members.
Perception is everything
Investing, like any other skill, is a matter of perspective.
A great trade for one investor might be considered mediocre to another. The difference lies in the amount of information each has access to.
To illustrate this point, let’s take an example if an individual bought Bitcoin at $8 and sold it later when its value was climbing around $300 they could view that as successful investing. But, knowledge surrounding peak prices over $1,000 may cause them to reconsider their opinion on such potential gains or losses.
Timing’s Importance Shouldn’t be Overstated
Investors who bought stocks at the beginning of the year and are now sitting on 50-60% losses would likely be feeling disappointment and possibly regret. They could also be viewed quite differently from investors who bought three months earlier and are sitting on 50% gains.
This example illustrates how timing can play a crucial role in investment outcomes. In crypto world, even a small difference in timing can lead to vastly different results. It also shows how the current market trends and news can affect cryptocurrency value.
To excel in the world of trading and investing, staying ahead is key. A proactive approach should include tracking trends, and news updates, and remaining informed about the current conditions.