• Whale buyers, or simply whales, describe entities in financial markets with significant purchasing power.
• Originating from the world of high-stakes gambling, the term “whale” is used to describe big spenders, analogous to the large size of whales in the sea.
• Whales are characterized by their substantial capital and the ability to influence the market; one example is Warren Buffett’s investment firm, Berkshire Hathaway.
• Whales also exist in real estate, which are massive firms that often buy properties outright without financing, to mixed results in the market.
• No specific amount of investing dollars would classify one as a whale, but it’s typically proportional to their chosen security’s sector, industry, or market.

A whale or whale buyer represents someone with substantial financial power. Their actions, decisions, and strategies can shape their market.

The term “whale” originally referred to someone with a high skill and/or spending power in poker, which classified players’ skill level by equating them with sea life[1]. It later took to meaning someone willing to place exceedingly large bets since whales are typically the “biggest fish in the sea.”

Similarly, in the financial and investing arenas, a whale refers to an entity or individual with substantial capital.

Much later, with the advent of cryptocurrency and gaming microtransactions, whales also referred to people with high amounts of coins, tokens, and other digital assets like non-fungible tokens (NFTs). They’re contrasted with “dolphins” (moderate spenders) and “minnows” (lowest spenders)[2], referencing poker’s original usage of the term.

Whatever the sector (whether in the stock market, crypto, or gaming), whale buyers possess immense financial power, typically manifested in:

• Substantial capital: They often have access to vast personal wealth or sizable financial resources.
• Diverse portfolio: Their investments aren’t confined to real estate; they often have stakes in various sectors. For example, a bitcoin whale may own thousands of coins, and their decision to buy or sell can result in notable market swings. Similarly, in the art and collectibles world[3], whales can set records, driving up valuations of certain pieces or artists simply by showing interest.

• Significant purchasing capacity: Many can buy assets outright without the need for financing. For instance, the purchase of a $238 million penthouse in New York City by hedge fund billionaire Ken Griffin[4] showcases the profound financial capacity of some whale buyers.
• Influence and impact: Whales set investment trends because their decisions can influence market direction. A significant purchase can spur demand and drive up prices, while a large-scale sale can lead to dips in value. Smaller investors watch, analyze, and sometimes even mimic, hoping to replicate the same results.

Despite their influence, whales also navigate challenges. Their sizable investments mean they have more at stake. Market volatility, regulatory changes, or broad economic shifts can impact their portfolios significantly. Plus, their large moves often come under scrutiny, both from market regulators and the public, given the potential for market manipulation.

When applied to real estate, particularly in the U.S., a whale typically indicates an investor who, through significant acquisitions, has the power to influence market dynamics.

For example, their focus on regions like Miami and the Hamptons[5] has turned these areas into luxury hotspots, driving up property values and reshaping their demographics. Certain counties like San Jose in California (which houses Silicon Valley)[6] have seen a surge in prices due to high-profile tech billionaires setting up estates. However, this comes with challenges, including the potential for inflated property values and reduced accessibility for average buyers.

Here are other examples of how whale buyers affect local and regional markets in real estate.

Economic Implications

While whale buyers boost local economies through their investments and the subsequent attention these transactions garner, they can also inflate property values to unsustainable levels[7].

This phenomenon is particularly noticeable in San Francisco, where vast tech wealth led to skyrocketing real estate prices, pushing many long-time residents out of the market.

Property Development Trends

Real estate developers are keenly aware of the preferences of these whale buyers. As a result, there’s been a noticeable uptick in the construction of ultra-luxury condominiums and gated communities catering specifically to their tastes, equipped with amenities like private helipads, art galleries, and in-house spas.

In the stock market, whales are investors who command vast amounts of capital and, consequently, wield significant influence over stock prices and market trends. Unlike the average retail investor who may buy or sell shares in hundreds or thousands, whales operate in much larger magnitudes, often moving millions or billions’ worth of assets in a single transaction.

Their actions can reverberate across the entire market. For example, if a whale decides to buy a significant stake in a company, it can drive up the stock price simply due to the increased demand.

Conversely, a large-scale sell-off by a whale can trigger a drop in the stock’s value. Such movements can be due to various reasons, ranging from strategic portfolio adjustments to reactions to global economic events. This happened in late 2020 when Warren Buffet’s investment firm, Berkshire Hathaway, sold Apple shares for almost $10 billion[8], prompting a flurry of activity among analysts and investors alike.

In some cases, even a mere rumor of a whale considering an investment in a company (or selling a stake) can cause market fluctuations. In fact, this is an actual strategy employed by “news traders”[9].

While whales have the power to influence markets, they also bear substantial risks. Their vast holdings mean that even a small percentage drop in a stock’s value can equate to significant losses. Hence, they back their investment strategies with rigorous research, vast experience, and a deep understanding of market dynamics.

While both have substantial financial clout, there are distinct differences:

• Individual vs. collective: Whales act on personal or singular entity interests, whereas institutional investors represent collective interests, like those of pension funds.
• Flexibility: Whale buyers often have more freedom in their investment choices, not bound by the same regulations or stakeholder pressures as institutional entities.
• Scale of impact: While individual whales can influence localized markets, institutional investors have the power to sway broader market trends.

Note that institutional investors themselves may also be described as whale buyers, but not all whale buyers are institutional investors[10].

What qualifies an investor as a “whale”?

While no strict financial threshold is universally agreed upon, the term “whale” typically refers to an investor who holds a large enough stake in a particular market or asset to influence its price or trends. This can mean owning a significant percentage of a company’s stock, holding a substantial amount of a cryptocurrency, or making large-scale real estate purchases that can sway the price of their chosen security.

For example, a $100 million investment in a penny stock is a huge deal, but the same amount is not as impressive for those with huge market caps like Google or Coca-Cola[11]. Therefore, the former may be classified as “whaling,” while the latter is not.

How do whales affect market stability?

Whales provide liquidity in a market, but their actions might influence stock prices, either positively or negatively[12].

However, their large-scale investments can inject confidence into a market, drawing in other investors and contributing to overall stability. Similarly, sudden large-scale sales or acquisitions by a whale can introduce volatility, causing rapid price fluctuations that can deter more risk-averse investors.

Are there regulatory measures in place to monitor or limit the influence of whales?

In many regulated markets, like stock exchanges, there are measures to monitor and sometimes limit abrupt large-scale activities that can disrupt market equilibrium. This is to prevent market manipulation or insider trading[13].

However, in less-regulated markets, like certain cryptocurrency exchanges, the actions of whales can be less predictable and more influential, leading to calls for more robust regulatory oversight[14].

1. Why Are Big Spenders Called Whales? (n.d.) Old School Gamers. Retrieved from https://osgamers.com/frequently-asked-questions/why-are-big-spenders-called-whales
2. How To Catch A Whale: User Acquisition for Gaming Apps. (n.d.) Appier. Retrieved from https://www.appier.com/en/blog/high-value-user-acquisition-gaming-apps
3. Petscher, Y. (2023, June 18.) Whales are feasting on NFT Art. Forkast+. Retrieved from https://forkast.news/whales-are-feasting-on-nft-art/
4. Mihaila, G. (2022, March 18.) $238 Million Sale of NYC Penthouse Shatters All Previous Records, Becomes the Most Expensive Sale in U.S. History. Fancy Pants Homes. Retrieved from https://www.fancypantshomes.com/real-estate-news/238-million-nyc-penthouse-becomes-the-most-expensive-home-ever-sold-in-united-states/
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6. Omololu, E. (2023, April 11.) Why Is San Jose So Expensive? 10 Reasons Why. So Expensive. Retrieved from https://soexpensive.org/why-is-san-jose-so-expensive/
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8. Ausick, P. (2021, February 27.) Apple is Berkshire Hathaway’s biggest equity investment, so why did Warren Buffett sell shares? Milwaukee Journal Sentinel. Retrieved from https://www.jsonline.com/story/money/investing/2021/02/27/warren-buffett-sell-apple-shares/115479822/
9. Russell, J. (2022, December 20.) What Is “Buy the Rumor, Sell the News” Trading Strategy? The Balance. Retrieved from https://www.thebalancemoney.com/what-does-buy-the-rumor-sell-the-news-mean-1344971
10. What are Whales in the Stock Market? (2023, June 21.) TickerTable. Retrieved from https://tickertable.com/what-are-whales-in-the-stock-market/
11. What Is a Whale in the Stock Market? (2022, June 22.) ValueofStocks. Retrieved from https://valueofstocks.com/2022/06/22/whale-in-the-stock-market/
12. Market Movers: What Is A Whale In Stocks?  (2022, November 8.) Investing Journal. Retrieved from https://www.investingjournal.io/posts/market-movers-what-is-a-whale-in-stocks
13. John, K., Narayanan, R. (1997). Market Manipulation and the Role of Insider Trading Regulations. The Journal of Business, 70(2), 217–247. Retrieved from https://doi.org/10.1086/209716
14. Fahrer, N., Coughlan, A. (2023, June 1.) The (somewhat lively) state of crypto regulation. Thomson Reuters. Retrieved from https://www.thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/crypto-regulation/