How to Track Whales?101 Wallet Tracking Guide

When it comes to cryptocurrency trading, users can use technical indicators and price patterns to maximize their returns. Support and resistance, bullish flags, Bollinger bands and moving averages are common cryptocurrency trading tools.

How to Track Whales?101 Wallet Tracking Guide

When it comes to cryptocurrency trading, users can use technical indicators and price patterns to maximize their returns. Support and resistance, bullish flags, Bollinger bands and moving averages are common cryptocurrency trading tools.

The problem is that when everyone is using the same indicators, institutional investors tend to predict what everyone else might do and take early profits. This means that if users really want to gain an edge over the institutions in the crypto market, they have to go beyond basic technical analysis.

One of the easiest ways to do this is to use on-chain analysis, and one of the most powerful on-chain signals is whale movement.

Not many people know how to use this signal effectively, and this article will tell you everything you need to know about whale movements and how to use them to minimize everyone’s pain and maximize gains.

On-chain Cryptocurrency Analysis
To understand the whale movement, everyone needs to be familiar with on-chain analytics. There is sort of a crash course here.

How to Track Whales?101 Wallet Tracking Guide

As we know, most cryptocurrency blockchains are publicly visible. This means that anyone can see most crypto transactions in real time, which can easily be done using the blockchain browser.

The cool thing is that this level of transparency allows everyone to do more than just verify that our transactions are going through.

How to Track Whales?101 Wallet Tracking Guide

Most blockchain browsers can rank wallet addresses based on the number of cryptocurrencies or tokens they hold. Some people prefer etherscan.io to do this by default. However, if we use Coin Smartchain or any other project like Cosmos, Avalanche, we need to use their tracker.

How to Track Whales?101 Wallet Tracking Guide

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This is very useful because it tells us if the supply of cryptocurrencies or tokens is evenly distributed among the holders or if only a few wallets hold the majority of the supply.

How to Track Whales?101 Wallet Tracking Guide

If the supply of a cryptocurrency or token is heavily concentrated in a few wallets, there is a big risk that one of the wallet holders might start selling, which would cause the price of the cryptocurrency or token to plummet.

Blockchain browsers can even help us understand what people are doing with their cryptocurrencies. Most blockchain browsers will label wallets that belong to both centralized and decentralized exchanges. This can let us know if people are trading or holding these cryptocurrencies or tokens.

If there is a large supply of cryptocurrencies on the exchange, it is likely that the people holding the cryptocurrencies do not intend to hold them for the long term.

How to Track Whales?101 Wallet Tracking Guide

If we see that most of the cryptocurrency supply is being exchanged regularly, this suggests that the people holding that cryptocurrency are not planning to sell it anytime soon. Now, some smart cryptocurrency traders are even starting to track the cryptocurrency wallets of wealthy individuals and institutions.

How to Track Whales?101 Wallet Tracking Guide

This makes it possible to simulate the buying and selling of smart currencies, sometimes even finding and buying popular 100x cottage coins before they are released in the news.

These more elaborate on-chain strategies are much more difficult to do manually. This is why companies like Glassnode and CryptoQuant exist.

How to Track Whales?101 Wallet Tracking Guide

On-chain analytics platforms combine price with on-chain data to create new indicators that often give us a better understanding of the cryptocurrency market than technical analysis indicators and price patterns.

For example, Glassnode’s Position Fluctuation Indicator shows how bitcoin supply is moving over a given period of time. When these dark waves start to peak, it means that people are starting to sell off. As we can see, the tops of these peaks match the tops of previous bull markets quite well.

How to Track Whales?101 Wallet Tracking Guide

The only problem is that these advanced on-chain metrics can cost thousands of dollars to use. Some of them even cost tens of thousands of dollars per year.

How to Track Whales?101 Wallet Tracking Guide

The good news is that many of the free on-chain metrics are just as good if you know how to use them properly, and that includes Whale Movement.

How to Track Whales?101 Wallet Tracking Guide

Whale Movement 101
In a nutshell, Whale Movement is a large cryptocurrency trade. It’s a simple signal that the direction of the transaction can have a huge impact on the price of cryptocurrency.

When we see cryptocurrency being sent from a regular wallet to an exchange wallet on a blockchain browser, it means that the person sending the cryptocurrency may want to sell it.

How to Track Whales?101 Wallet Tracking Guide

When transactions are small, this is no big deal. However, if we see hundreds of millions of dollars of cryptocurrency being sent from wallets to exchanges, then this selling pressure could cause prices to plummet.

Conversely, if we see hundreds of millions of dollars of cryptocurrency being sent from an exchange to a wallet, the people behind the wallet don’t plan on selling anytime soon.

How to Track Whales?101 Wallet Tracking Guide

This sudden reduction in market supply can be rocket fuel for aggressive price action if enough whales leave the exchanges and enter wallets to buy specific cryptocurrencies.

How to Track Whales?101 Wallet Tracking Guide

When it comes to stablecoins, these two whale movements have opposite effects. If hundreds of millions of USDT or USDC are moving from wallets to exchanges, this means that whale users are looking to buy, which could mean that the market is about to rise.

How to Track Whales?101 Wallet Tracking Guide

If hundreds of millions of stablecoins have exited the exchanges, this means that the whales are not going to invest in the near future, which could mean a temporary downturn, or even a full-blown bear market.

How to Track Whales?101 Wallet Tracking Guide

If we want to know what all these whale swap moves are for. The answer is arbitrage.

How to Track Whales?101 Wallet Tracking Guide

In other words, the whale players take advantage of the price difference between the two exchanges. And because they have so much capital, in dollar terms, the small difference can bring significant returns.

How to Track Whales?101 Wallet Tracking Guide

The last type of whale movement is the wallet-to-wallet transaction. These are probably the most misunderstood. Believe it or not, most large investors don’t use cryptocurrency exchanges. This is because the large amounts of cryptocurrencies they wish to buy and sell could churn the market in the ways I just mentioned.

How to Track Whales?101 Wallet Tracking Guide

Instead, they trade over-the-counter. otc, which allows large investors to buy or sell large amounts of cryptocurrency directly from exchanges or cryptocurrency custodians at a fixed price.

How to Track Whales?101 Wallet Tracking Guide

When we see hundreds of millions of dollars of cryptocurrency circulating between wallets, this could be some sort of OTC transaction.

How to Track Whales?101 Wallet Tracking Guide

The problem is that we can never be sure if this is a purchase or a sale until the fact happens. Now, that’s why Tesla’s purchase of bitcoin didn’t affect the price of bitcoin until they publicly announced it.

How to Track Whales?101 Wallet Tracking Guide

So that means we don’t need to pay too much attention to “wallet-to-wallet” whale movements, because they have a minimal impact on prices.

What are whale movements?
Now, in theory, the trading dynamics just mentioned are all we need to know about whale movements, and some of us are probably already familiar with everything that has been said.

The problem is that there are a few factors that can turn whale movement into a misleading signal, and these are usually ignored by the average crypto trader.

The first factor has to do with definitions. How big does a cryptocurrency transaction have to be to be classified as a whale movement? The answer depends on the tracking tool being used. For example, Whale Alert appears to report every transaction over $1 million on 13 blockchains in its Twitter feed.

How to Track Whales?101 Wallet Tracking Guide

This arbitrary threshold can be a huge problem when it comes to measuring the impact of whale movement on cryptocurrency prices. This is because of the market depth.

How to Track Whales?101 Wallet Tracking Guide

Market Depth tells us how much money is needed to drive cryptocurrency prices up or down on any given cryptocurrency exchange. This can easily be viewed on Coingecko or Coin Market Cap. The more money it takes to push the price up or down by 2%, the greater the market depth of the cryptocurrency.

How to Track Whales?101 Wallet Tracking Guide

That’s what’s relevant? If we see $10 million worth of bitcoins move from a wallet to an exchange with a market depth of $20 million or $30 million, even if all the bitcoins are sold immediately, it has negligible impact on the price.

However, most cottage coins have a market depth of millions, sometimes less. This means that a whale movement of this size can dramatically reduce the price of a cottage coin, as it drains the order book.

How to Track Whales?101 Wallet Tracking Guide

What’s more, sometimes cottage whale movements in dollars are so small that they can’t even be picked up by whale tracking tools. Even so, it is still enough to send prices plummeting.

How to Track Whales?101 Wallet Tracking Guide

Therefore, when trying to determine what impact whale movements actually have on their prices, it is important to note the depth of the market for cryptocurrencies, rather than immediately assuming that the sky is falling.

How to Track Whales?101 Wallet Tracking Guide

Beyond the basic whale sport
This brings me to the second element of whale sport that is often forgotten, which is that not all whale sports are created equal.

How to Track Whales?101 Wallet Tracking Guide

Because most cottage coins are closely related to Bitcoin. Bitcoin’s whale movement can crush our favorite alternatives, even without significant whale activity.

Moreover, as the bull market nears its peak, certain whale trades will become more important than others.

On any given day, we could see significant whale movement in cryptocurrencies like bitcoin and ethereum. Some of these are large, and they have a predictable impact on prices.

How to Track Whales?101 Wallet Tracking Guide

We won’t see an old bitcoin wallet trading for the first time in a long time every day.

How to Track Whales?101 Wallet Tracking Guide

Transactions from these dormant bitcoin wallets can seriously shake up the market, and that’s because they indicate that the price has risen enough to make even the most hardcore of holders want to sell.

Often, the activity of these ancient whales makes crypto news and is sometimes noticed by whale trackers. Fortunately, most of these transactions have been small wallet-to-wallet deals in recent months. However, if we start to approach the 100k or 200k mark and we start to see some of the older wallets start to move their bitcoins to exchanges, that could mean we are at or near the top of the price for this cycle.

How to Track Whales?101 Wallet Tracking Guide

It is also important to remember that the importance of a whale transaction depends on the token economics of the cryptocurrency and which whale wallet the transaction comes from.

How to Track Whales?101 Wallet Tracking Guide

There is a difference between the largest dogcoin holder throwing out 10 million DOGEs and a smaller dogcoin wallet doing the same thing.

How to Track Whales?101 Wallet Tracking Guide

If large transactions from wallets to exchanges are coming from the largest holders of unfairly distributed cryptocurrencies, then it may be time to abandon the ship.

How to Track Whales?101 Wallet Tracking Guide

The same rules apply to transactions conducted by the cryptocurrency wallets of famous crypto billionaires such as Vitalik Buterin, who is known for selling large amounts of Ether at the peak of the last bull market.

How to Track Whales?101 Wallet Tracking Guide

Unlike most crypto billionaires, Vitalik has made his wallet address public. But unfortunately, the transactions he makes are apparently not tracked by the free Whale Tracker tool.

How to Track Whales?101 Wallet Tracking Guide

This means that if we take ETH and want to get a mobile signal from V-God, we have to pay close attention to his wallet address. Vitalik’s wallet address and Etherscan link can be seen here below.

Vitalik’s ETH wallet address:

How to Track Whales?101 Wallet Tracking Guide

Now, at this point, we should take the time to identify the wallets belonging to any significant individuals or teams working on our favorite cryptocurrency projects. When we see them start moving large amounts of cryptocurrency or tokens to exchanges for sale, we may want to consider doing the same thing.

How to Track Whales?101 Wallet Tracking Guide

The caveat here is that it is sometimes difficult to tell if the cryptocurrency they are transferring is actually heading to an exchange, and some project founders will even deliberately cover up their sale.

How to Track Whales?101 Wallet Tracking Guide

That’s why we should ask questions before we draw conclusions, and that’s why most people fail when they try to trade with reference to whale movements.

The psychology of whale movement trading
A third factor that is overlooked when analyzing whale movements is that smart investors know how the average retail trader might react to certain whale movements.

How to Track Whales?101 Wallet Tracking Guide

The most prominent example of this is whenever a large number of stablecoins are minted. Logically, a new supply of USDT means that bitcoin will go up, right? Well, not exactly.

How to Track Whales?101 Wallet Tracking Guide

Stabilized coins are minted and destroyed based on market demand.

Now, this is necessary because if there is too much or too little USDT compared to demand, this could push the price of USDT up or down from the rate pegged to the US dollar.

How to Track Whales?101 Wallet Tracking Guide

The main conclusion here is that the minting of USDT or USDC doesn’t automatically mean that the price will go up. It just means that the demand for these stablecoins has increased.

How to Track Whales?101 Wallet Tracking Guide

After all, if a big investor is buying bitcoin, they probably won’t mint a bunch of stablecoins to do it. They would just use the OTC counter.

Regardless, these facts fall on deaf ears to the average whale watcher who mistakenly believes that the minting of stablecoins means we are about to see a huge pump.

How to Track Whales?101 Wallet Tracking Guide

This leaves them vulnerable to manipulation by large investors who may push the price up a few percentage points after the stable coin is minted to give the illusion that it is happening.

Retail investors put their money into this pump and get dumped by savvy money. The same thing is happening in the whale movement.

How to Track Whales?101 Wallet Tracking Guide

The Wyckoff Method is based on the understanding that smart money knows how the average crypto trader reacts.

How to Track Whales?101 Wallet Tracking Guide

Conclusion
On-chain analytics is something I’ve been exploring to the maximum extent. As someone who has tried paid and unpaid on-chain metrics and signals. I can tell you that you can get a great result without spending a dime.

The main difference between the free and paid versions of most on-chain indicators is that the paid versions are more polished and offer us more options when filtering the data. When it comes to whale movement, using free tools like Whale Alert and CheckBitcoin.com gets more or less the same results as we found on Glassnode and Crypto Quant.

However, the indicator is only as good as the trader using it, and the average crypto trader doesn’t seem to know much about whale movements or how to use them.

I think this is related to the fact that there is no uniform definition of whale movement in cryptocurrencies. In my opinion, whale movement is any trade that is enough to disrupt the price of cryptocurrencies and everything else is just noise.

Because of this definition, it’s easy to forget that whale movement and whales may be mutually exclusive. This may sound a bit odd, but it helps emphasize the importance of knowing which wallet a whale user transaction is coming from.

I remember checking Vitalik’s wallet address shortly after the crash in mid-May and finding that almost all of his Ether was gone. It was a bit scary, but it turned out that he had just moved most of his ETH into a cold wallet.

Now, sometimes I wonder if these crypto billionaires ever play the “cowardly game” with the average crypto investor, moving large amounts of cryptocurrency to exchanges without buying or selling. They may even do it in conjunction with a specific news or event that they know will stir up strong emotions in the average retail investor.

If analyzing Witkoff’s approach has taught me anything, it’s that we’re better off assuming that those smart investors are always looking for opportunities to mess with our heads. Remembering this can go a long way, but make no mistake. If we see dozens of whale trades entering cryptocurrency exchanges at the same time, then this one could be for real.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/how-to-track-whales101-wallet-tracking-guide/
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