Cryptocurrencies are cyclical and highly volatile as well. For risk averse investors, these are major red flags. However, for crypto traders who can time the market, it is an easy way to make big bucks.

While crypto volatility is usually a product of market sentiment, it can also be influenced by large investors making massive transactions. Such accounts are known as whales and their transactions are known as whale movements. Good traders are always on the lookout for whale movements, hoping to benefit from the price fluctuations they cause.

How do whale movements affect markets?

If whales are buying large amount of a particular crypto, its price is bound to increase. On the other hand, if a large investor begins dumping a token en masse, it will lead to a drop in its prices.

The economics are very simple, when a whale buys in bulk, it creates scarcity, triggering a price rally. However, when such an investors dumps tokens into the market, supply increases dramatically, causing prices to drop.

Also, several traders and investors tend to copy whale movements, because when they buy/sell, the rest of the market usually follows suit.

What’s an indicator of a whale selling?

A sign of whale selling is when you see a wallet transferring large chunks of crypto into exchange wallets. This means that they’re going to sell the crypto leading to a fall in prices. This is your chance to get out in front and cash out before the fall.

What’s an indicator of whale buying?

Whales usually prefer cold wallets for long-term crypto storage. These are not connected to the internet, making them less vulnerable to hacks and attack. Therefore, if you see any large withdrawals out of an exchange wallet and into a whale wallet, it is a good indicator that the entity intends to hold onto those coins.

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This outflow from crypto exchanges results in a scarcity of supply, driving price rallies. For instance, back in 2019, the price of Bitcoin jumped from around $4,200 in April to around $11,500 by the end of June. The surge seemed like a natural breakout, but it was later discovered that a purchase of 20,000 BTC executed across three different exchanges led to the spike.

What is over the counter trading?

When whales do not want to disturb the markets with their movement, they tend to opt for over the counter or OTC trades. This means that the transfer of crypto is from one wallet to another wallet (secretly owned by an exchange or another buyer) for a predetermined fixed price.

These OTC trades often go under the radar and only have an effect on the markets when the news breaks out. A great example of this is when Tesla bought 1.5 billion dollars’ worth of bitcoin without affecting the market until the news broke out.

The whale tracking tools

Now that we know some of the whale tracking basics, let’s dive into some of the tools you can use to track whales. The tracking is made possible by the transparent nature of cryptocurrencies where anonymity is possible but not secrets.

1. Blockchain Explorers

The transparency of cryptocurrencies can be unlocked with blockchain explorers. They act like crypto search engines where you can search for a wallet and discover what it holds and all its transactions. You will not know the name unless it is a popularly revealed wallet.

Some blockchain explorers provide you the option of sorting transactions by amount. This can help you narrow down on the whales and get an insight of what they are up to. Blockchain explorers are updated very close to real time.

While their actual use was to check for the success/failure of your transactions, they have now also morphed into whale tracking platforms.

2. Whale Alert

Whale Alert is what you call community help. It is a Twitter account as well as Telegram channel that provides real time alerts on whale movements. These alerts are your way to make quick moves based on the data.

Whale Alert qualifies any transaction above one million dollars to be a whale movement which might not necessarily qualify as one in the large cap cryptocurrencies.

3. Paid on-chain data analytics platforms

There are many up and running platforms like CoinCarp and Etherscan.io that distil the information from blockchain explorers to and provide it to you in a palatable format.

On these platforms, you can set your own parameters for the information distillation, and you will be alerted when such events occur. As these are specialised programs, you might have to pay a subscription fee avail the service.

Conclusion

When you’re a crypto trader, you have many tools and indicators by your side to help you trade better. The problem is that these indicators are also available to everyone else and that dilutes your advantage significantly. With whale tracking, you are getting yourself in a position to accurately predict market movements and profit off of them.

We hope that the above tools can help you get started on whale tracking. Please be careful if you’re basing your entire strategy on whale movements as some whales tend to leverage their power over the markets.

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