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1.
What are crypto whales?
Most cryptocurrencies have many large holders of the asset who can influence the price of the crypto asset. For active investors and cryptocurrency traders, it helps to understand the market behavior of these whales.
Crypto whales refer to large holders of cryptocurrencies. They can be individuals or organizations that typically own more than 10% of all cryptocurrencies. For example, MicroStrategy owns nearly 130,000 Bitcoin ( BTC ) and can change the price of BTC through their market participation. Therefore, tracking the behavior of crypto whales can provide timely insights into the price movements of crypto assets.
This is not just a crypto phenomenon. In traditional markets, when big players, brands, or hedge funds like Warren Buffett reveal that they have taken a position in a particular asset, the asset price rises, and vice versa. That is, when these players sell an asset, the market usually follows.
With cryptocurrencies and non-fungible tokens (NFTs), all transactions take place on-chain. Due to the transparency provided by blockchain, transactions performed by wallets held by whales can be discovered by the size of the crypto positions they hold. These wallets can be tracked and then used to understand how the broader market is performing.
2.
What is Crypto Whale Tracking?
There are specialized solutions for tracking the behavior of crypto whales. These solutions can provide analysis of whale behavior and, in some cases, make investment/trading decisions for users.
Cryptocurrency traders and investors constantly track the amount of cryptocurrencies moving in and out of exchanges. When a cryptocurrency like Bitcoin or Ethereum (ETH) is moved in large quantities to an exchange, some selling is expected, leading to a drop in price. Conversely, if cryptocurrencies flow from exchanges into wallets, it is considered a precursor to a rise in price.
This is because when the net outflow of cryptocurrencies from exchanges is high, they reduce the supply, which leads to an increase in price. Typically, whales can buy cryptocurrencies on exchanges and transfer them to their wallets in large quantities. This can cause the price of cryptocurrencies to rise.
In some cases, whales may choose not to disrupt the market by buying or selling on an exchange. Instead, they conduct an over-the-counter (OTC) trade between two wallets. For example, they may send Bitcoin to a wallet, which sends USD Coin ( USDC ) back, thereby selling BTC without the market noticing the transaction.
When the blockchain records a large transaction, investors can research this transaction and extract the wallets involved in it. If a wallet holds a large cryptocurrency position, it can be labeled a crypto whale wallet. From then on, regularly checking these wallets and the transactions made can provide insight into the price movements of the cryptocurrencies held in the wallets.
Whale tracking is equally beneficial in the NFT market. Most NFT communities have a large number of collection holders. In many cases, these NFT holders are identified by the community. Tracking the wallet behavior of these whales can help investors make quick buying and selling decisions.
For example, if a famous NFT collector or a whale sweeps the floor of a non-fungible token collection, this could indicate high conviction. Followers of NFT collections and whales will notice this and buy non-fungible tokens. Gary Vaynerchuk noticed this behavior several times during the 2021 NFT bull run.
However, keeping track of whale action manually can be overwhelming and time-consuming, even if it’s just for one cryptocurrency or NFT collection. That’s where whale tracking tools come into play.
3.
What are crypto whale tracking tools good for?
Thanks to whale tracking tools, investors are able to identify wallets owned by whales and track them for their buy and sell operations due to the transparency provided by blockchain. The use of tracking tools helps in the automation of the tracking process.
Most cryptocurrency investors own more than one cryptocurrency in their portfolio. In order to understand market movements, they need to identify and track several wallets that hold large amounts of the cryptocurrencies they are interested in. On-chain analytics tools provide this functionality.
Tracking tools scan the blockchain, spotting them in real time and notifying users when whale wallets submit transactions. These tools can also help identify transactions above a certain size, allowing users to spot whales in the crypto ecosystem.
Similarly, the behavior of NFT collections can be tracked, such as listing new non-fungible tokens below the reserve price, selling NFTs at bids, sweeps, etc. The reserve price of a non-fungible token collection is the lowest price at which an NFT can be purchased. Occasionally, when the market appetite for NFT collectibles is low, the reserve price will drop.
A drop in the reserve price typically starts with one holder of the NFT listing their shares below the reserve price. Therefore, whale tracking tools can be used to spot such behavior so that investors understand and act accordingly.
On the other hand, floor sweeps indicate high demand for NFT collections. This refers to the behavior when someone buys many non-fungible tokens in a collection listed at a reserve price. Whale tracking tools can spot when a whale's wallet sweeps the floor of a new collection. This will alert NFT investors, who can then start tracking the new collection.
4.
What are some common crypto whale tracking tools?
Whale tracking tools such as Whale Watchers and Whale Bot Alerts can help investors detect whale behavior and make quick and timely decisions.
Whale tracking tools have different functionalities, some can be just a simple window on top of a blockchain, while others have analytical and charting capabilities across multiple blockchains. Some only cover crypto whale tracking, while others offer NFT whale tracking as well.
Various analysis tools only provide simple analysis and notifications about whale activity, while others provide users with more comprehensive charts and analytical learning opportunities. Some just do a simple feed, while others use channels such as Twitter and Telegram to keep users informed.
Some of the key tools for whale watching include Whale Watchers, Whale Bot Alerts, Whale map, Whale alerts, Clank App and Coincarp. Apart from this, tools like Etherscan and Solscan sit on top of their respective blockchains to provide whale tracking capabilities.
One can get as technically proficient as possible with whale tracking. However, the market’s reaction to whale trades is not entirely predictable. Understanding information about whale behavior is useful, but it is only one input that influences cryptocurrency price action. This is especially true in markets that are primarily driven by macroeconomic factors.