OTC — Dealing with the Whales
Whales.
Everyone’s favourite nightmare in the crypto-sphere.
Can’t make money without them hoarding coins, can’t be left holding bags after they’ve left and dumped.
If you don’t know what a Crypto Whale is, they are in essence extremely large holders of a project. Take a look at Satoshi Nakamoto, his original wallet holds over 1+million $BTC. That’s 1/21 of the total Bitcoin supply. He is a whale as he holds a significantly large portion of Bitcoin’s supply.
With that in mind, whales are everywhere whether you see them operating or not. Quite often they are large or renowned investors who are offered opportunities not available to the average cryptocurrency speculator. Have you ever looked at a projects ‘Tokenomics’ and saw that 20% of the supply went to private sale? — I’d be happy to put my money on saying that private sale was most likely to a few individuals or groups, but not available to many people.
This then creates the problem, what happens if the whale has enough of the protocol and decides to jump ship?
The easiest route for them is to take their tokens/coins to the open market and hit sell. The order book will be obliterated with the whales holdings, filling all the limit orders below price just to shift the bag of tokens being sold. To small projects this can be critical, and most likely if a whale decides to dump on the market it will kill the project or at the very least kill any momentum that the project had going.
I could go on and on talking about whales, what they are and how they operate, but to be honest you probably don’t care and you want to know what is the purpose of this article. So let me tell you.
I want to introduce you to Inter-Stellar’s counter-whale mechanism.
Our OTC (Over the Counter) Ethical Whale program.
As a project leader, there is nothing more I want to see than Inter-Stellar thrive, our investors and community happy and all of our goals and objectives being achieved. So the last thing I want is to come into any issues with potential whales dumping on the market and crashing the price, destroying any trust between myself, the project and the community.
So I introduced the proposal to the Inter-Stellar team to build an OTC service, whereby any potential $ISX whales can get in touch with the team and perform an OTC trade.
Let me explain how this will work and the benefits it provides to the protocol, the whale and the community.
The specifics aren’t quite ironed out yet in terms of how we are going to operate 100% although I have plans and an idea to test.
We will introduce a route of communication available for whales to get in contact with the Inter-Stellar team. Once in contact, the team will organise an OTC trade with the whale, coming from the protocol treasury reserves and project capital. Remember how I spoke about using the War Chest to avoid any nasty volatility in the price of $ISX. This is another strategy that links in very nicely.
This service will be available for whale buys and sells.
The protocol will essentially swap the whales capital for treasury capital to avoid the large orders hitting the open market and causing unsustainable pumps and disastrous dumps.
Let me give you an example. Let’s say a whale approaches the team and says they are ready to sell $25k worth of $ISX. In a hypothetical situation, let’s say that would drop price by -15% in one sell order on the open market as it finds new bidders to fill the sell order. Inter-Stellar instead will transact on behalf of the protocol, paying the whale $25k and receiving their $ISX tokens in return. These tokens would then be added to the war chest and redistributed at a later date if and when the market allows (think in spikes of heavy upside volume).
On the flip-side, let’s say a whale wants to purchase $25k worth of $ISX. This may cause a +30% pump which is clearly unsustainable and will cause extreme volatility. We can operate an OTC trade to sell $25k worth of $ISX from the protocol treasury and receive the $25k in payment from the whale, again avoiding hitting the open market. This $25k would then be used for operations discussed in the war chest article (think buybacks, burns, token purchase in downward volatility).
The Protocol
This process is massively beneficial for the protocol as it allows us to operate alongside whales without shaking the open market, causing huge spikes and obliterating trust in the protocol from investors and community.
The Whale
On the open market, the whale is most likely to experience large amounts of slippage. Imagine they are selling $25k tokens at a price of $0.10 but there is only $5k of buy orders at $0.10. Their sells will be filled at a lower price until filled completely. This means they are fulfilling their sales/purchases at actual market price and avoiding hefty fees (although there will be an OTC service fee) and slippage.
The Community
I don’t feel that I need to delve much deeper into how this benefits the community, but in essence it helps avoid heavy volatility in the market and helps protect the value of your investments during times of heavy volatility. Most likely, you won’t even know there is heavy volume taking place.
All OTC trades will be disclosed to the community as and when they take place along with a treasury update.
Well, that wraps this article up and I hope the above wasn’t too difficult to follow and understand.
Like I mentioned earlier, I am really trying to protect the protocol moving forward and build a fortress of defence to mask the protocol and investors from heavy volatility to create a sustainable project that puts the community first.
As always, I appreciate your time.
Leader of the Martian Army.
