- Title
- How Do Large, Sophisticated Cryptocurrency Trades Impact Broader DeFi Market Dynamics?
- Author(s)
- Keith Hazen Keith Hazen (Federal Reserve Bank of Philadelphia and Rutgers University)
- Julapa Jagtiani Julapa Jagtiani ( Federal Reserve Bank of Philadelphia )
- Loretta J. Mester Loretta Mester (Wharton School of Business, University of Pennsylvania and Griswold Center for Economic Policy Studies, Princeton University )
- Abstract
- Using transaction-level data for Bitcoin (BTC), Ethereum (ETH), and Wrapped Bitcoin (WBTC) matched to public “Whale Alert” signals, we examine how large-scale cryptocurrency trades shape market microstructure. Specifically, we test whether whale transactions alter the composition of active non-whale participants, trigger leader-follower herd behavior, and elevate short-term return volatility. We document a stark divergence between networks: Whale alerts heavily reshape (native) BTC participation by mobilizing previously inactive retail and institutional investors, whereas ETH and WBTC participant profiles remain highly stable on the Ethereum platform. Furthermore, non-whale investors exhibit strong leader-follower behavior in the BTC market — buying and selling in tandem with whale direction. This pattern is largely absent in the Ethereum ecosystem, except among the largest non-whale tranches. These behavioral dynamics directly mirror market stability: Whale alerts induce a brief 24-hour spike in BTC volatility (most acutely following WBTC alerts) but coincide with compressed volatility on the Ethereum platform. Additionally, these asymmetric market responses persisted across Ethereum’s transition from proof-of-work to proof-of-stake. These findings indicate persistent informational and structural asymmetries between large and small digital-asset investors.
- Creation Date
- 2026-09
- Section URL ID
- Paper Number
- 358
- URL
- https://gceps.princeton.edu/wp-content/uploads/2026/09/wp358_Hazen-Jagtiani-Mester_CryptoWhales.pdf
- File Function
- Jel
- G14, G23, G28, G41
- Keyword(s)
- Cryptocurrency, Ethereum, ETH, Bitcoin, WBTC, crypto whales, DeFi
- Suppress
- false
- Series
- 3