What are crypto whales?
These are large cryptocurrency holders. Individuals or organizations owning more than 10% of the market can be individuals or organizations. MicroStrategy, for example, owns nearly 130,000 Bitcoin and can influence the price of BTC through market participation. Following the actions of whales, for example, provides timely additional insight into the market movements of an asset.
This isn't just a phenomenon. When a major player, such as Warren Buffett, a brand, or a hedge fund, uncovers that they've taken a position in a specific asset, the price of that asset rises, and vice versa. However, the market usually follows suit when these participants sell an asset.
All transactions involving cryptocurrencies and nonfungible tokens (NFTs) are on the blockchain. Because of the transparency provided by the blockchain, transactions performed by whale wallets can be identified by the size of the positions they are holding. These wallets can then be tracked to determine how the market as a whole might behave.
What is crypto whale tracking?
Traders and investors constantly monitor the volume of cryptocurrencies entering and exiting exchanges. When a cryptocurrency, such as Bitcoin or Ether, is relocated in huge volumes into an exchange, some sell action is expected, resulting in a price drop. If cryptocurrencies flow out of exchanges and into wallets, it is thought to be a sign of a price increase.
This happens because when exchanges have a large net outflow of cryptocurrencies, supply is reduced, resulting in a price increase. A whale can frequently buy digital assets in exchange and relocate them in large quantities into their wallets. This could lead to bullish price action for the market.
In some scenarios, whales may choose not to disrupt markets by purchasing or selling on an exchange. They would conduct an OTC exchange between two wallets. For example, they could send Bitcoin to a wallet, which would then send back USD Coin, resulting in a BTC sale without the market noticing the transaction.
When a large transaction is recorded on the blockchain, investors can examine it and identify the wallets involved. Whale wallets are wallets that hold large amounts of cryptocurrency. Following that, a regular check on all these wallets and the transactions that occur can be useful in assessing the price movements of the cryptocurrency stored in the wallet.
Whale tracking can be useful in the NFT markets as well. The collection is widely held in most communities. In many cases, the community has identified these NFT holders. Tracking the behavior of these whales' wallets can assist investors in making quick buy/sell decisions.
For example, sweeping the floor of a nonfungible token collection by a famous NFT collector or a whale can indicate strong convictions. The whale and followers of the collection would notice this and purchase the nonfungible tokens. Gary Vaynerchuk observed this several times during the NFT bull market in 2021.
However, manually tracking whale activity can be daunting and time-consuming, even for a single cryptocurrency or NFT collection. This is where whale tracking software comes in handy.
What purpose do crypto whale tracking tools serve?
The majority of investors have more than one cryptocurrency in their portfolio. They will have to locate and monitor several wallets that handle huge amounts of the assets they are keen on to stay informed of price swings. On-chain analytics tools offer this functionality.
Tracking tools scan a blockchain, detect when whale wallet commits a transaction in real-time, and inform the user. These tools can also assist in identifying transactions of a specific size, allowing users to conduct whale discovery in that crypto ecosystem.
Similarly, NFT collections can be monitored for actions such as listing new nonfungible tokens below the floor price, selling NFTs at the bid price, floor sweeps, and so on. A nonfungible token collection's floor price is the lowest price at which an NFT can be purchased. The floor price falls when the market desire for a collection is weak.
The fall in floor prices frequently begins with one NFT holder listing it below the floor price. As a result, whale tracking tools are able to detect such behaviors, alerting an investor and allowing them to act accordingly.
In contrast, a floor sweep signifies a significant demand for an NFT collection. This is the action of purchasing a large number of nonfungible tokens that are listed at the floor price. When a whale's wallet drifts the floors of a new collection, whale tracking tools can detect it. This will notify investors, who will then be able to track the new collection.
Most common cryptocurrency whale-tracking tools
Some tools are as simple as a window on top of a blockchain, while others offer analytics and documenting capabilities across multiple blockchains. Some only track crypto whales, while others track NFT whales as well.
Various analytics tools provide only basic analytics and notifications about whale activity, whereas others offer users more in-depth learning opportunities about charts and analytics. Some use a simple feed, while others use channels such as Twitter and Telegram to keep users updated.
Whale Watchers, Whale Bot Alerts, Whale maps, Whale alerts, Clank App, and Coincarp are some of the most important tools for watching. In addition to these, tools such as Etherscan and Solscan sit on top of their respective blockchains to provide tracking functionality.
With whale tracking, one can become as technically adept as possible. However, the market response to a whale transaction is unpredictable. It is useful to have information about whale behavior, but it is only one factor that influences price action. This is particularly true in a market dominated by macroeconomic factors.
Do you think that there are any risks associated with using whale trackers? Let us know your thoughts by sharing this article on social media.