The Anatomy Of a Whale
Tags: Finance, Cryptocurrency, Bitcoin, Ethereum, Ripple

The Whale Feeding Cycle

PARABOLIC PHASE: Attract the Krill

The setup for this phase is: the whale waits until there’s some news that could be considered ‘good’, and the volume leading up to it is relatively low.

In XRP’s case, the opportunity came when Ripple announced their intent to do the XRP lockup (Never mind the endless other good news for Ripple around that same time that had absolutely zero impact on the price).

Now that there’s a seemingly rational explanation for a price increase, the whales micro-trade the price up really fast, sparking an intense lemming-like investor rally that overshoots on its own momentum, corrects hard (30–50%), and then stops its free fall when the buys and sells equalise.

At this point the whales start propping the price at this new plateau with micro-trades until the price stabilises on its own. Phase complete. Our baby whales are suddenly pretty damn big, and it’s not likely there will be any new whales coming that can match these first-adopters.

Now we shift to the..

SUPPRESSION PHASE: Weigh down the price

There are two aspects to suppression: killing upward trends, and “grinding” downwards (with occasional fakeouts to keep it interesting). For killing uptrends, we saw between the XRP parabolics last year that no matter what good news came down the pipe, the price didn’t significantly budge, or whatever budge happened, didn’t stick.

Ben Bernanke speaking at Swell? Zip. Partnership with tons of new FIs? Zero. You can look at XRP for all of 2017 and put mark points where good news was released, and nothing concrete happened at all; nothing.

This is suppression, and even Ripple, Inc publicly announced they were actively selling during this time. That’s not to say they are entirely responsible for suppressing the price, yet they acted in a way that may be confused for profiteering, but really, they were using the money from their market XRP sales to build Ripple out globally, so in reality they were acting as a benefactor whale, which we’ll all benefit from in the long run. Thank you Ripple.

As far as the downward price-grind however, it’s quite easy to see that between the parabolics, XRP ran a repeating pattern of slightly up and slightly down, back up again but not quite as high as the last time, and then down just a little bit further than the previous time, for months and months.

Mental torture. Realise that inexperienced traders react emotionally and they only value the current price as an indicator of success or fail. They’re not registering the importance that MUFG adopted Ripple and promoted XRP. They’re not registering that central banks from around the world met at a private symposium with Ripple. They don’t care that officials from the Chinese government had a meeting with Ripple IN THEIR SF OFFICE!.. No, inexperienced investors ONLY see a price descent happening and get extremely nervous about losing their far-too-large-for-them investment, and their loose hands sell their cheap XRP.

Gobble gobble, whales reset the trap by driving the price almost back to where it was (or sometimes not even back up if they think they can shake things up just a bit lower), and start grinding all over again.

Some of you may ask, how does holding the price down help them make money?

Look at it this way, let’s say the price of a coin is $1 at the beginning of the year, and they want to cash out at the end of the year at $10, does it matter if the price is $1 from February to November? Not at all. What happens between now and the target date is inconsequential in terms of profit.

What does matter to them is trying to get at many coins as possible as cheaply as possible. You’ve heard the old saying, buy low, sell high? Well, for us, that’s a guessing game, but for whales who can drive the price in any direction, they can predictably always buy low and sell high because they manufacture the lows and highs. And by performing these cycles of grinding, they are accumulating more and more XRP from loose hands, such that when they do allow the next parabolic, their coin holdings are much larger than if they just let the price grow naturally because the result would be that nobody would be inclined to sell their coins during this growth period.

In other words, suppressing prices means people sell to the whales at a cheap price and they continue to accumulate, whereas allowing natural price appreciation encourages hodlers which blocks the whales from increasing their holdings. Make sense now?

STARVATION PHASE:

Whales can only shakeout so many people before there are no loose-handed investors left, and all that remains are the seasoned investors that stick it to the whales. Won’t be taking my XRP!, they cry.

Moreover, if they keep the price down for too long, no new money will be interested to join the party. Famine ensues.

So what’s a sad poor whale to do? I’ve got it! Wait for some related good news, anything will do, and start another parabolic!..which like clockwork will attract a whole new generation of inexperienced investors to feed off of! How about a $100 million XRP hedge fund! Nah.. How about MoneyGram! Of course!! It’s so absurdly transparent.

It’s also possible for the current whale price-suppression phase to end prematurely if something too big to control happens, like super-good-news, and the new investors come in all by themselves, naturally creating a parabolic. Either way, once things settle back down, the whale resets its feeding parameters to the new plateau, and begins the feeding cycles once again. Wash. Rinse. Repeat. As long as XRP is expected to appreciate from all the forces that give it value, these feeding cycles will continue, with intermittent parabolics to keep the fresh blood coming in.