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Crypto whales — why they matter and how you can track them

2021.08.03 Lipsa Das

An introduction to crypto whales, their significance, and the tools and methods to monitor their activity

As the bull market cools down, retail activity is on the decline; but large holders, or “crypto whales,” have continued to increase in number. For instance, on July 2, 2021, the emergence of 18 new whales was observed, with a collective holding of 82,760 BTC — worth over $3 billion at current prices.

While the classification of whales largely makes use of arbitrary measures, holders with more than 1,000 BTC are often considered as such. With their vast holdings, trades made by whales naturally have an impact on BTC’s price, but this effect is more prominent across altcoins because of their smaller market capitalizations.

An example of this was when ETH, the second-largest cryptocurrency, dropped more than 50% on Kraken, a U.S.-based crypto exchange, in February 2021. This volatile move down from nearly $1,600 to $700 could have been the result of a single whale selling their holdings, according to the exchange’s CEO.

The fact that institutional investors have been accumulating BTC and other cryptocurrencies means we are likely to see the number of whales grow. And given how they can impact prices, it is imperative to understand how their trades can be identified.

In this article, we will break down crypto whale trading activities along with some steps on how to spot whale trades so that you can incorporate the information into your own trading strategy. Let’s start with understanding who crypto whales are.

Who are crypto whales?

Crypto whales are entities who hold a large number of coins of a particular cryptocurrency. As mentioned earlier, there is no “official” threshold to be considered a whale, but when it comes to BTC, 1,000 coins is the most commonly used figure. For altcoins, this number is usually much higher, due to the fact that their market capitalizations are significantly lower than that of Bitcoin.

In the next section, we discuss why market observers may be interested in whales and their trading behavior.

Why track crypto whale transactions?

Understanding and preempting major market moves

For the purposes of this article, it is not necessary to know how a whale came to possess their coins. Rather, we focus on the existence of entities that have a holding large enough to possibly impact the market with a sizable transaction. Sharp movements in the market are often related to the market’s liquidity — specifically market depth and spreads. Whales, with their vast supply of coins, are able to temporarily drain liquidity and increase market volatility.

Because these major players are also trading to increase the value of their holdings, it is fair to assume that their transactions are aimed at moving markets in ways that benefit them at the expense of those on the other side of the trade.

A single whale, or a group, could potentially orchestrate a crash by selling a significant number of coins in order to instigate a wider market sell-off, only to then swoop in and buy back coins at cheaper prices. Similarly, they could also trigger a short-squeeze so that the asset’s price soars and attracts retail investors, whose buying pressure then amplifies the surge even more and thereby increases the value of the whales’ holdings.

For example, on April 2, 2019, the value of BTC jumped from around $4,200 to nearly $5,000 within just two hours. While this initially seemed like a breakout for the long consolidating chart, reports pointed toward a single order of 20,000 BTC that was executed across three different exchanges. This purchase successfully changed market sentiment and acted as the trigger for a rally that saw the leading crypto appreciate more than 240% by the end of that June.

Bitcoin surged on April 2, 2019, due to a 20,000 BTC buy order. Source: TradingView

This ability of such large holders to influence prices is why market participants may want to keep track of whale activity. Given the transparent nature of blockchain-based transactions, monitoring whales can provide clues as to possible moves before they transpire, allowing market participants to act preemptively and position themselves to benefit once the movement occurs.

We will discuss ways to identify such market moves later on in this article.

Understanding market composition and stages

Markets are largely cyclical in nature, going through stages of euphoria and depression at their extremes. Typically, euphoric stages culminate in peaks driven by retail money, and prolonged depression eventually results in the market bottoming out, which is when smart money moves in.

Even though retail investors are on the rise — institutions and whales are still the driving forces behind market trends. Monitoring whales allows us to see their trading patterns and to get a sense of their holdings. If whales are reducing their holdings as the price goes up, one could infer that a market top could be near — especially if retail traders are increasing their holdings during the same time.

An example of this can be seen in the chart below. The green line represents a segment of retail holders (i.e., the number of addresses with a balance equal to or greater than 0.01 BTC), the gold line represents BTC’s price, and the red line shows a segment of whales (i.e., the number of addresses with balance equal to or greater than 1,000 BTC).

Number of retail and whale Bitcoin addresses compared with BTC price. Source: Glassnode

The chart shows how whales (red) increased their BTC holdings significantly between the end of December and mid-February, and during that period, both the price of BTC (gold) and the number of retail investor addresses (green) followed that trend. Whales then started reducing their holdings from March to May while retail investors continued increasing, and the price remained largely range-bound before crashing in mid-May.

Those monitoring whales during this time could have adopted caution in March/April by looking at how whales were actively reducing their holdings, and they might have averted buying ahead of the May crash.

Similar charts with on-chain data pertaining to whales can be used to arrive at various conclusions based on the current market composition and recent behavior exhibited by crypto whales. In the next section, we discuss some of the on-chain data points that can shed light on whale trading activities.

How to successfully track whale movements?

On-chain analysis for whale tracking

When it comes to monitoring whales, we look at wallet addresses containing a minimum of 1,000 BTC. These wallets can be identified on the blockchain and then monitored for activity. Any incoming or outgoing transactions to/from these wallets may be of interest to market participants. An additional metric that may provide useful insights is the general increase or decrease in the number of qualifying wallets.

Before delving into the tools available for monitoring whales, we will briefly outline the main types of transactions to look out for when it comes to whale trading activity.

Wallet-to-exchange transactions

Wallet-to-exchange transactions, or exchange inflows, are important because of the way crypto trading works. Because exchanges are the most common platforms for trading, any movement of coins from a whale to a known exchange wallet usually means the entity has deposited coins into their exchange account and intends to trade them in the short- to mid-term.

A large BTC deposit generally implies that the whale is considering selling coins on the market, whereas a large deposit of a stablecoin, such as USDT, may indicate a potential purchase. Since large whale trades can move markets, any sign that a whale could be preparing to sell coins puts downward pressure on the market, and vice versa.

Exchange-to-wallet transactions

Large crypto holders almost invariably prefer cold wallets for long-term storage due to their greater security. This means a large withdrawal out of an exchange wallet and into a whale wallet may indicate that the entity does not intend to sell those coins in the near term. 

Such outflows also reduce the supply of coins on exchanges and can result in price appreciation, especially during times of high demand. Alternatively, an outflow of stablecoins could be seen as a negative sign, implying that whales prefer to remain in cash and that they deem market conditions unfavorable for investment.

Wallet-to-wallet transactions

Apart from exchanges, whales often perform over-the-counter crypto trades for reasons related to privacy and liquidity, as OTC trading services can often manage large trades while mitigating any liquidity issues.

OTC trades are largely untraceable, and their effects on the price are often not as prominent as regular trades. However, a large transaction from one whale wallet to another wallet could potentially be an OTC trade.

It is important to note here that the occurrence of any of the transaction types listed above does not guarantee any specific outcome. Whales are also aware that their transactions are being tracked — and sometimes, they might move coins between wallets and exchanges only to trigger market movements. Similarly, when whales trade on exchanges, they might put up buy or sell orders that they don’t intend to fill, simply so that such orders show up on order books, possibly impacting market sentiment.

To learn more about buy and sell orders as well as market liquidity and order books, take a look at our cryptocurrency trading guide for beginners.

Whale tracking tools

On-chain analysis can take many forms, depending on a user’s technical proficiency. Any node with a full copy of a blockchain can review any and all transactions made on that blockchain, as well as other data points, which can then be queried and exhibited in various formats. However, existing tools, such as blockchain explorers, make this process much more accessible and user-friendly.

Blockchain explorers

Blockchain explorers act as databases for blockchains and can be used to instantly check transactions, wallet addresses and historic records from inception to date.

For example, Etherscan, a blockchain explorer for the Ethereum blockchain, can show a variety of data points, such as the top wallet addresses in terms of ETH holdings and so on.

Top ETH wallets ordered by balance. Source: Etherscan

Most of the top coin holders, however, are usually exchanges. You can determine this by the Name Tag field.

Addresses that don’t have a name tag and have relatively fewer transactions are where things get interesting. You can then go to the individual wallet address and see the exact amount of tokens that they have on the Ethereum mainnet, dates when tokens were last moved and so on.

A likely ETH whale wallet address with transaction details and token distribution. Source: Etherscan

If a particular whale wallet looks interesting, you can use the watchlist feature on Etherscan to set alerts in order to track transactions to and from that address, as shown below.

Option to add addresses to your watchlist and set alerts on Etherscan. Source: Etherscan

Whale Alert

Whale Alert is a Twitter account that posts large transactions across major blockchains and also tags known wallet addresses. The service has an API function for those wanting to customize their data-gathering. However, the posts on Twitter should suffice for general monitoring.

A Whale Alert post from July 31, 2021. Source: Whale Alert

Paid on-chain data analytics platforms

While the free alternatives above provide a decent level of information, they do require more work in terms of finding whale addresses and charting any data collected.

As the crypto market grew over the past few years, we saw the emergence of dedicated, paid analytics platforms that do all the work for their users and provide access to numerous advanced metrics and filtering options.

Some of the more popular resources include CryptoQuant and Glassnode, both of which also have custom metrics. However, no platform is completely accurate, and there are instances when data is incorrectly attributed to certain entities.

Watch the whales, but make your own plan

Tracking whales can help you understand and contextualize market movements and patterns. However, your investing and trading decisions should not depend solely on such methods.

The crypto market is largely unregulated and lacks the checks and balances traditional markets are subjected to. This means market manipulation is far easier and more common, with whales trying to stay ahead of the curve at all times.

Buy/sell orders and order-book walls are easy ways for whales to manipulate market sentiment, and the movement of coins across wallets doesn’t always mean a real transaction has taken place. So, while tracking whales could give you an edge, it is not the most reliable information. Ultimately, your trading and investment decisions need to be backed by your own research.

As outlined in our cryptocurrency trading guide, you should be cognizant of the risks of a volatile crypto market and have a long-term plan with exit strategies based on those risks.

If you’re new to trading, try OKX’s demo trading platform to practice and to develop your own system, taking into account both fundamental and technical analyses as well as supplementary data such as whale trades.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.