In the crypto market, a whale refers to an entity that holds a large sum of specific tokens. It can be a person, an institution, or an exchange. For example, in the context of Bitcoin, a whale is an account holding 1,000 or more Bitcoins, including Pantera Capital and Fortress Investment Group. In a broader sense, an NFT whale is an address with a position of over $1 million. Not only do the whales make their own profits, but they also influence the way investors trade NFTs.
As the NFT market continues to move through volatility in 2022, the number of NFTs held and "NFT whales" keeps growing. For example, on October 2, 2021, there were 647 whales with NFT positions of over $1 million. Today, the number has grown to 1254 with a combined asset of over $5 billion, accounting for 26.68% of the $19.2 billion global market cap.
Defining a "whale"
Due to its uniqueness, the NFT market has its own definition of a whale that differs from how the fungible token market defines them. In general, a whale is an investor who has strong purchasing power and has made considerable profits.
They tend to have the following characteristics:
Influence: High
Assets: High
NFT Belief: High
Profitability: High
Holding Period: Long
Keeping an eye on whales is always good
Why track NFT whales?
First of all, whales would have a great impact on their reputation and capital. By copying their trades, we're able to recognize market trends and grab investment opportunities and timings. If whales start listing below the floor price), the price is likely to drop. Conversely, if some whale listings are priced above average, it indicates that whales are bullish on that project.
On the other hand, dramatic market volatility is usually related to market liquidity, especially market depth and spreads. If a whale holds a large number of NFTs of a particular collection, it can increase market volatility. Therefore, we need to focus on whale holders, how much they hold, and how they can influence the market through large-scale trading.
Essentially, whales are capable of creating a chain reaction that affects other investors in the same collection. With the Whale Tracking feature on NFTGo.io, you can now track accounts that hold large amounts of NFTs, and follow whale alerts in Discord.
The double-edged effect
Whales stir up the market primarily from two aspects: buy and sell.
Buy: Some whales have a strong belief in the value of good projects and will make floor price purchases to protect these projects when times are tough. In addition, price spikes are usually associated with massive buy-ins by whales. However, it is important to note that some whales raise collection prices by sweeping up the floor in large quantities (some of these trades may involve wash trading). Then, FOMO kicks in and stimulates people to enter when market sentiment is high. At this point, whales are likely to sell some of their NFTs for a substantial profit.
Sell: There are instances where whales sell one after another by listing NFT below market price, thus causing floor price fluctuations. Subsequently, people start panicking and selling their assets at prices lower than that. Whales will again buy in the dips if they know some positive indications occur later on. Besides, whales will also make plans ahead based on insider news, so keeping an eye on them is always good.
Distribution of NFT holders
Whales would eat small fishes in the ocean. In the case of the NFT market, they also cause waves and bring volatility. What are the other types of traders in the ocean?
HODLer - Crab
Characteristics: We refer to people who possess a certain level of market knowledge as crabs. Oftentimes, they're the OGs—market HODLers who firmly believe in their own judgment and the future of the industry (hard shell, walk sideways).
Behaviors: Long-term holders tend to consistently support certain projects while preaching and educating on the internet and also communicating and discussing with each other. They are less concerned with the short-term sentiment of the market and instead look at the potential for long-term growth. The NFT assets they buy will either increase in value or decrease over time, but even if the market value drops, they will not sell immediately. This characteristic of theirs takes patience, self-discipline, and courage, as well as a strong belief in the industry. For this type of investor, there is no such thing as "selling". Rather, they only decide whether to buy or not at a given time.
Influence: High
Assets: Medium-High
NFT Belief: High
Profitability: Medium-High
Holding Period: Relatively Long
Flipper - Shark
Characteristics: Traders of such kind are highly sensitive to profit and they know where to find them—like sharks that are always on the hunt for prey. Their "fast in, fast out" strategy naturally contributes to a smaller holding value compared to whales. Flippers tend to be "aggressive" (very active) in projects and are always looking for ways to get a slot in whitelists and public sales.
Behaviors: Flippers are aware of every short-term market movement, real-time gas fees, and the latest whitelist update. In the meantime, they calculate costs and profits and make quick decisions under pressure. Although there are times when they miss the best timing to sell, they still enjoy the security that comes with a guaranteed income.
Influence: Variable
Assets: Medium
NFT Belief: Low
Profitability: Medium-High
Holding Period: Short
Newbie - Shrimp
Characteristics: Shrimp is a nickname for newcomers in the NFT market.
Behaviors: They fluctuate back and forth with market trends and actively listen to the suggestions and opinions of other traders mentioned above.
Influence: Low
Assets: Relatively Low
NFT Knowledge: Poor
Profitability: Low to Medium
Holding Period: Low to Medium
NFT Collector/Artist - Octopus
Characteristics: Octopuses like to collect seashells for fort building. In a similar sense, this type of trader favors collections of high artistic value and generally consists of people with high purchasing power.
Behaviors: Traders in this category buy mainly for the purpose of collecting instead of profiting. They also communicate with creators to understand the underlying value of their creations and the messages and stories that they're conveying. Artistic value is more attractive to them than the NFT's potential to bring profit.
Influence: Relatively High
Assets: Relatively High
NFT Belief: High
Profitability: Medium
Holding Period: Long
Gambler- Shells
Characteristics: An extremely unique category of NFT investors. They are followers of meme trends and like to collect imitations of popular projects. In the final reveal, though, they could either harvest the pearl or an empty shell. They do not necessarily believe in a future for NFT, but still, choose to go all in because of FOMO.
Behaviors: When making decisions, they are less concerned with project roadmaps, ecosystems, value estimates, and airdrop prospects. Rather, they view meme attributes and innovations as the determining factor.
Influence: Low-Medium
Assets: Medium
NFT Belief: Nothing
Profitability: Medium
Holding Period: Short
Gamer - Penguin
Characteristics: Penguins spend most of their time onshore and only a short time in the water. People of this category mainly take part in GameFi and only become NFT holders due to the integration between NFT and GameFi. On the other hand, NFTs are viewed primarily as entry tickets for GameFi. The timing to sell NFT depends on the business model and new users of the game. Like penguins, these people are far away from all the holders above. Hence, any fluctuation in the PFP ocean will not affect their collections.
Behaviors: For such traders, they purchase an NFT because GameFi staking requires them to. When these NFTs are staked and transferred to the developer's staking address, they will be left with a blank OS page. However, this will not disrupt their unique profit-making mindset as an empty page is probably the best way to maximize their returns.
Influence: Low
Assets: Low-Medium
NFT Belief: Low
Profitability: Low-Medium
Holding Period: Medium
Holders, tones of community
Many people do not stick to one trading style. When choosing a trade reference, it is important to take into account finances, risk appetite, and your long-term goals.
As @mentalist420 put it:
"There are investors and there are collectors".
Different proportions of investor types in a project do affect its future development. If more than 80% of project participants are speculators, the project will very likely go to zero after the hype subsides. However, if HODLers comprise the majority of the project, the project will probably do well. This might also spark some ideas for NFT creators:
Who did you build your collection for? NFT collectors, or investors?