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Bulls, Bears and the Kraken: Making Sense of Crypto Market Forces
After spending just a few hours researching cryptocurrency, you will notice an abnormally large number of references to mammals. Three in particular. Bears, Bulls, and Whales. What do these mammals have to do with trading cryptocurrency? Turns out, understanding how bloggers, analysts, and technologists speak use these terms can help you decipher what they’re trying to communicate. Most of the time, they’re talking about the state of the market. It’s a “Bull Market”, or a “Bear Market”. Then there is Kraken, one of the largest cryptocurrency exchanges in the world. Kraken and Whales aren’t just aquatic creatures, they also have a lot to do with liquidity. Liquidity is a very important concept to understand, especially if you are trading with millions of dollars.
Bears and Bulls
Bears and Bulls are like yin and yang. They are two sides of the same coin. Bears represent the group of people or traders that cause the markets to go down through selling. On the other hand, Bulls represent the group of people that cause the markets to rise. Whales refer to individuals or traders with a large amount of trading power. These traders have the ability to influence the market because of the volume of assets they are holding at any one time.
Whales and Low Liquidity
The ability for whales to influence the market depends entirely on the liquidity of the market. Liquidity refers to the ability for a particular asset to be traded at a specific price. For example, let’s say Bitcoin is trading at $10,000, and you want to sell (liquidate) 100 bitcoin. There needs to be $1 million worth (100 x 10k) of buy orders on the exchange for you to sell your entire holdings. If there are not that many buyers, then the whale will dramatically drop the price on that exchange. Whales also have the ability to dramatically increase the price of an asset through a large buy order. The lack of market liquidity is largely responsible for the cryptocurrency having an overall reputation of volatility.
The Great Bear Whale of 2014
One particularly great illustration of whales at work, is an event in 2014 known in the crypto space as “The Great Bear Whale”. One bitcoin trader put up a sell order for 30000 bitcoin, for $300 a piece. This was below the established price at the time, causing markets to crash. A more in depth coverage of the story can be read on cnbc. This problem of singular actors being responsible for large price swings is becoming a thing of the past. The cryptocurrency markets are maturing as the larger exchanges in the world focus on market liquidity. The next question you may ask is, “What exchanges offer the best liquidity?”.
Take a Look at Kraken
Dan Held, director of Business Development at Kraken was recently on Anthony Pompliano’s podcast discussing a wide range of topics. Dan was able to speak directly about the focuses of Kraken, including their dedication to providing highly liquid markets. Both Dan Held, and Kraken CEO Jesse Powell have made it clear that Kraken is one of, if not the most transparent, and deeply liquid cryptocurrency marketplaces on earth. With fake volume reporting an ongoing problem, it is no wonder that users are feeling the effect of bears, bulls, and whales on exchanges. Kraken is one of the most highly rated exchanges on CryptoVantage.com, head on over to our exchange review to learn more.
