Cryptocurrencies are often promoted as a revolutionary technology that “democratises” finance and opens up equal opportunities for all. However, behind the shiny facade of this narrative lies a harsh reality: the crypto market is increasingly turning into a mechanism of wealth redistribution, where wealth flows from millions of small investors to the hands of a few “whales” – large players who control significant amounts of digital assets.
How the system works
The mechanics of the crypto market often resemble a classic pyramid scheme. Large players – funds, exchanges, or individual investors – buy up assets at early stages at low prices or even create their own tokens. Then, when prices skyrocket due to marketing campaigns or market hype, small investors, fuelled by FOMO (Fear Of Missing Out), buy up tokens en masse. At the peak of growth, the “whales” sell their assets, recording huge profits, which often leads to a price crash. As a result, newcomers are left with assets that are worth much less than they paid for them.
Data confirms this trend: it is estimated that about 90% of retail traders in the crypto market lose their money. Instead, the top 1% of players who hold the largest volumes of coins are steadily increasing their capital. For example, in the Bitcoin and Ethereum networks, only 2% of addresses control more than 90% of all coins, making the market vulnerable to manipulation.
“Whales versus fish
In the crypto world, “whales” are the holders of large volumes of cryptocurrency whose actions can radically affect the market. A single sale or purchase of a significant number of tokens can bring down or up the price of an asset in a matter of minutes. For example, in 2021, sharp movements of “whales” in the Bitcoin market caused price fluctuations of tens of percent, leaving small investors at a loss.
This concentration of assets contradicts the idea of decentralisation promoted by cryptocurrency advocates. While blockchain as a technology is indeed decentralised, the actual distribution of capital remains in the hands of a few. Large exchanges, venture capital funds, and influential investors shape market trends, manipulate prices, and dictate the terms of the game.
The illusion of freedom
Cryptocurrencies are positioned as an instrument of financial freedom, but in practice they often become a trap for unprepared investors. Ordinary participants are encouraged to believe in the “technology of the future”, while the bigwigs are playing for a very specific outcome – profit maximisation. The situation is further complicated by the lack of regulation: unlike traditional financial markets, the crypto sphere remains a “wild west” where manipulation, fraudulent schemes and pump-and-dump are commonplace.
What should small investors do?
The crypto market is a high-risk environment where success depends on knowledge, caution, and resistance to psychological pressure. Here are some tips for those considering investing in digital assets:
- Research assets. Only invest in projects whose value and technology you understand.
- Limit your risks. Invest only the amount you are willing to lose without serious consequences.
- Avoid hype. Tokens that grow rapidly amid the hype often have no real value.
- Be sceptical. Promises of “fast money” are usually part of a manipulative game.
Cryptocurrencies have the potential to become the tool of the future, but the current digital asset market is far from being fair. While some dream of financial freedom, others – the big players – use the hype to redistribute wealth in their favour. For small investors, the crypto market remains a high-stakes game where knowledge and caution are the only guarantees of protection against losses. In this game, money does not appear out of nowhere: when some earn, others inevitably lose.
Author : Marianna Nyzhnia
