What are crypto whale trackers and how do they work?
There are dedicated solutions to track the actions of crypto whales. These solutions can provide analysis of whale actions and in some cases they can also make investment/trading decisions for the user.
Crypto traders and investors are constantly tracking the amount of cryptocurrencies entering and exiting exchanges. When a cryptocurrency such as Bitcoin or Ether (ETH) is moved in large quantities to an exchange, it is expected to see some selling action resulting in a price drop. Conversely, if cryptocurrencies flow out of exchanges into wallets, it is considered a precursor to a price increase.
This is because when exchanges have a high net outflow of cryptocurrency, they have reduced supply resulting in a price increase. Often, a whale could buy cryptocurrencies on an exchange and move them into the wallet in large volumes. This could result in bullish price action for the crypto.
In some scenarios, whales may choose not to disrupt the markets by buying or selling on an exchange. They would do an over the counter (OTC) transaction between two wallets. For example, they can send Bitcoin to a wallet that will send USD Coin (USDC) back, resulting in a sale of BTC without the market detecting the transaction.
When the blockchain records a large transaction, investors can study the transaction and pick up the wallets involved in it. If the wallets have large cryptocurrency positions, they can be labeled as crypto whale wallets. From then on, a regular check of these wallets and the transactions carried out can be insightful in assessing the price movements of the crypto held in the wallet.
Whale tracking can be equally beneficial in the NFT markets. Most NFT environments have large holders of the collection. In many cases, these NFT holders are identified by the community. Tracking the behavior of the wallets of these whales can help investors make quick buy/sell decisions.
For example, if a famous NFT collector or a whale sweeps the floor of a non-fungible token collection, it could indicate high convictions. Followers of the NFT collection and the whale would take notice and buy the non-fungible tokens. This behavior was noticed with Gary Vaynerchuk several times during the 2021 NFT bull market.
However, it can be overwhelming and time-consuming to manually stay on top of the whale action, even when it’s just for one cryptocurrency or NFT collection. This is where whale tracking tools come into play.
