Cryptocurrency Crash Caused by 7 Whale Traders
Cryptocurrency has been one of the most talked-about topics over the past few months, but it hasn’t always been a positive conversation. The cryptocurrency market is a fast-moving and volatile one, with prices rising and falling in a matter of minutes. From its meteoric rise to its sudden crash, cryptocurrency has had its share of ups and downs. In fact, we saw a huge drop in value just last month when almost all major cryptocurrencies experienced what some are calling “the crypto bloodbath.” Bitcoin, the largest cryptocurency dropped below $18,000 in June 18 and it has been struggling to rise since then. A recent research shows that large transactions by whale traders on LUNA and TERRA had resultant effect on the market as a whiole.
What Caused the Recent Crypto Crash
Many crypto enthusiasts have tried to investigate the cause of the current cryptocurrency market plunge.
Many narratives have been drawn. However, amongst all the theories about what caused the crash, whether it was scaling issues or regulatory pressure, there was a common suspect: whale traders.
Whale traders are investors with enough money to move the market, and in this report by Nansen, it reveals that only seven individuals were responsible for the crash last month.
A group of seven trading whales are reportedly responsible for the crash. They were able to manipulate markets by placing large sell orders through multiple exchanges, which triggered other investors — who were holding on to their positions or not yet ready to sell — to panic sell their holdings as well.
The result? An estimated $40 billion in losses worldwide and some very angry investors who wanted nothing more than answers and justice.
How Crypto Whale Traders Move the Market
Crypto Whales can have a significant impact on the cryptocurrency market. The term “whale” refers to an investor who holds a large number of crypto assets.
However, some people may consider someone who holds $100 million worth of BTC to be a whale and others will say that you need to have at least $2 billion for that title.
What is known for sure is that whales can manipulate markets and cause significant swings in price. Whale traders are not always bad news though! A whale crypto currency investor who bought a large sum of bitcoin pushed the price up to $ 20,000 in 2017. Another whale trader moved over US$ 1.1 billion, which is very instrumental to Bitcoin’s rise as the largest crypto currency today.
They do this through their ability to create large buy or sell orders which are then filled by smaller traders who see these orders and follow them blindly as if they were entering trades themselves.
Another example is when a crypto whale trader wants to influence the market price and buy more coins at a lower price. They start selling a huge amount of their crypto investments. This leads to a plummet on the market and an increase in the coin’s liquidity at a lower price. These traders can then buy again at a lesser price.
The majority of trading volume on exchanges is driven by these individuals, which makes them a small group of power players with substantial influence over cryptocurrency prices. These whales also often help stabilize prices by buying and selling at key moments in a coin’s price history – such as when it’s about to fall from its peak or rise from its trough.
They’re also responsible for creating many of those peaks and troughs in the first place: They buy up lots of coins in order to push their value up, then sell them off after they’ve made their profits (sometimes by simply doing nothing at all). This can contribute to crashes if there aren’t enough buyers willing to absorb large amounts of selling pressure without crashing the market entirely.
Crypto whales have massive amounts of money to spend on cryptocurrencies — they’re often investors who got in early and then made their fortunes.
And when they make an investment, they do so in a big way: sometimes buying up so much of a coin that it can control its price. When that happens, the market reacts accordingly — and you might see either a huge spike or crash as a result.
Why Do Crypto Whale Traders Control the Market
A study found that cryptocurrency trades in the range of $100 million can impact the crypto market by as much as 0.5%. The results are based on data collected between May and July 2019 and include over 2 million transactions.
The researchers also concluded that if a large trader were to suddenly sell his or her entire holdings at once, it could cause an immediate crash in price.
But why would whales want to control the price of their investments? It all comes down to how they trade cryptos. In many cases, they’re trading coins that they bought at incredibly low prices — and now they’re looking for ways to make some serious cash off them by selling them at higher prices than they paid for them originally!
This means that once they’ve bought up enough of a given coin, there’s no stopping them from taking advantage of its popularity by increasing its price artificially high (or vice versa). For some other investors, the decision might be a risk management mechanism during an unfavorable coin situation.
How 7 Crypto Whales Caused Recent Cryptocurrency Crash
According to Nansen’s findings, which were released on May 27th, LUNA and UST’s declines last month was the result of several factors. To disprove beliefs that the crypto-collapse was brought on by a single entity, this research focused on disproving those claims.
Nansen said the popular belief that the UST de-peg was like an undoing of an attacker or hacker was not true. When the UST depeg was first implemented, only a small number of participants were aware of the risks.
UST is a stablecoin that has a 1: 1 correlation to the US dollar. The UST-linked LUNA cryptocurrency, which had lost nearly all of its worth due to the loss of its dollar value, is now trading at less than a tenth of what it was at its all-time high price of $ 118.
Who Are the 7 Whale Traders?
According to research, the seven whale wallets that caused the UST crash are as follows:
- 0x4b5e60cb1cd6c5e67af5e6cf63229d1614bb781c (Celsius)
- 0x1df8ea15bb725e110118f031e8e71b91abaa2a06 (hs0327.eth)
- 0x41339d9825963515e5705df8d3b0ea98105ebb1c (Smart LP: 0x413)
- 0x9f705ff1da72ed334f0e80f90aae5644f5cd7784 (Token Millionaire)
- 0xeb5425e650b04e49e5e8b62fbf1c3f60df01f232 (Heavy Dex Trader)
- 0x8d47f08ebc5554504742f547eb721a43d4947d0a (EIP 1559 User)
- 0x68963dc7c28a36fcacb0b39ac2d807b0329b9c69 (Token Millionaire / Heavy Dex Trader)
You might be wondering who these people are and what their intentions were. Nansen released a report last month that revealed the seven individuals responsible for crashing the market in June. It turns out that these individuals or companies were unknown however they were exploiting the vulnerabilities in the curve pools securing UST. Nansen used on-chain analysis to uncover the activities that led to the UST deeper.
They researched the top net transactions in UST that occurred between May 7 to May 11, 2022 and discovered that these seven wallets sold off their holdings on exchanges to cause panic amongst other traders who saw huge losses during this time period.
It was evident that something was going on when they started seeing sell orders with prices higher than they should have been.
The research showed that a wallet closely related to Luna Foundation Group withdrew 150M UST, followed by 85M UST, 189.5M UST, 105M UST and the subsequent back and forth transactions continued. They noted that the wallet with the highest outflow withdrew 374M UST through about 8 transactions and it withdrew a total of 2B UST.
The report from Nansen says the owners of these wallets are unknown at the moment. However, they traded with large amounts of money and their activity was very unsophisticated unlike normal traders.
Terra’s UST and LUNA: Major Stable Coins that Caused the Crypto Crash
De-pegging of TerraUSD (UST) stablecoin was one of the main causes of the recent crypto meltdown, this caused Terra (LUNA) to lose nearly all of its value.
To understand Terra’s UST and LUNA for readers unfamiliar with the topic. Terra relied on a dual token system. UST was the algorithmic stablecoin pegged to $ 1, while LUNA served as its supporting asset, aiming to absorb the volatility that otherwise would be experienced by the stablecoin.
With an on-chain mint and burn mechanism, the UST token was created to maintain a fixed value, with the assumption that 1 UST is worth about $ 1 in LUNA regardless of market value. UST and LUNA supply expansions or shrinkage via on-chain arbitrageurs smoothed out volatility and UST price dislocations.
Even in the worst-case situation, an arbitrageur could buy cheaper UST and use the on-chain method to swap into LUNA. One UST, which is worth $ 0.90, would be converted into one LUNA, which is worth $ 1.00.
On-chain mechanism’s value and market value are different, and arbitrageur would once again pocket the difference between the two. This would help to reduce the flow until the peg is reached.
Can Crypto Whales Be Controlled?
As long as the market remains unregulated and decentralized, there is nothing that can be done to control crypto whale trader.
Crypto whales can only be controlled by limiting the amount of coins they can buy or sell, as well as by making it harder for them to convert their coins into fiat currency.
Another way to do this would be through government regulation, which isn’t likely to happen anytime soon because it would require a huge amount of work and coordination between countries all over the world.
Conclusion
The recent study makes It is clear according that large transactions made by crypto whales can actually impact the market.
The fact that a few whales caused the crash does not mean that cryptocurrencies are doomed. In fact, this could be a good thing for the market.
By creating a more stable cryptocurrency market, it will make it easier for everyday investors like you and me to invest in this space without worrying about whether our savings are going up or down overnight.