IntoTheBlock classifies as Whales all addresses that hold over 1% of a crypto-asset’s circulating supply. These provide an indication of the number of very large investors investing in a crypto-asset.
For crypto-assets of high market capitalization, whales own a greater dollar amount. For example a whale in Bitcoin likely owns a higher dollar amount than a whale in Dash, as its market capitalization is significantly smaller. For this reason, whales are kept in context relative to the total circulating supply of a crypto-asset.
Whales are also classified as Low Activity or High Activity to differentiate addresses that are constantly buying and selling from those that are simply holding. Addresses with over 300 transactions are considered to be high activity, while those below 300 are classified as low activity.
The Whales indicator signals the concentration in the ownership of a crypto-asset. If supply is highly concentrated (i.e. whales holding a high percentage of the supply), this can be interpreted as a potential risk for two reasons:
- 1.High supply concentration points to low decentralization. This is the case as if one person held 99% of the supply it would not be considered a decentralized ledger after all. If these addresses hold a large enough portion they could act maliciously to the expense of small holders.
- 2.A large amount of whales (especially high activity whales) points to few players moving the market. Therefore, this suggests that whales could potentially sell and crash the crypto-asset’s price.
Disclaimer. The whales indicator and other ownership indicators do not differentiate regular addresses from exchanges and smart contract addresses. Hence, the indicator provides an approximation of the concentration of ownership but not a fully-detailed one. IntoTheBlock is working on better classifying whales and smart contract addresses.