The importance of tracking crypto whales and the tools you can use to track their holdings

0

By CNBCTV18.com IST (Released)

mini

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

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

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

How do whale movements affect markets?

If whales buy a large amount of a particular crypto, its price is bound to increase. On the other hand, if a large investor starts to dump a token en masse, it will cause their prices to drop.

The economics is very simple, when a whale buys in bulk it creates a shortage, triggering a price hike. However, when such an investor throws tokens into the market, the supply increases dramatically, leading to lower prices.

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

What is a Whale Sale Indicator?

A sign of whale selling is when you see a wallet transferring large chunks of crypto into exchange wallets. This means that they will sell the crypto, which will cause prices to fall. This is your chance to come out front and cash in before the drop.

What is a whale buy indicator?

Whales generally prefer cold wallets for long-term crypto storage. These are not connected to the Internet, which makes them less vulnerable to hacks and attacks. Therefore, if you see large withdrawals from an exchange wallet to a whale wallet, this is a good indicator that the entity intends to hold those coins.

This exit from crypto exchanges leads to a scarcity of supply, leading to price increases. For example, in 2019 the price of Bitcoin went from around $4,200 in April to around $11,500 at the end of June. The push seemed like a natural breakout, but it was later discovered that a 20,000 BTC buy executed on three different exchanges led to the spike.

What is OTC trading?

When the whales don’t want to disrupt the markets with their movements, they tend to opt for over-the-counter or over-the-counter transactions. This means that the transfer of crypto is from one wallet to another wallet (secretly held by an exchange or another buyer) for a predetermined fixed price.

These OTC trades often go unnoticed and only have an effect on the markets when the news breaks. A good example of this is when Tesla bought $1.5 billion worth of bitcoin without affecting the market until the news broke.

Whale tracking tools

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

1. Blockchain Explorers

Cryptocurrency transparency can be unlocked with blockchain explorers. They act as crypto search engines where you can search for a wallet and find out what it contains and all its transactions. You won’t know the name unless it’s a popularly revealed wallet.

Some blockchain explorers give you the option to sort transactions by amount. This can help you target whales and get a glimpse of what they are doing. Blockchain explorers are updated very close to real time.

While their real use was to verify the success/failure of your trades, they have also turned into whale tracking platforms.

2. Whale Alert

Whale Alert is what you call community help. It is a Twitter account as well as a Telegram channel that provides real-time alerts on whale movements. These alerts allow you to take quick actions based on the data.

Whale Alert qualifies any trade over $1 million as a whale move which might not necessarily qualify as one of the large cap cryptocurrencies.

3. Paid on-chain data analytics platforms

There are many operational platforms like CoinCarp and Etherscan.io that distill information from blockchain explorers and deliver it to you in a palatable format.

On these platforms, you can set your own settings for information distillation and you will be alerted when such events occur. As these are specialized programs, you may need to pay subscription fees to enjoy the service.

Conclusion

When you are a crypto trader, you have many tools and indicators at your side to help you trade better. The problem is that these indicators are also available to everyone and this greatly dilutes your advantage. With whale tracking, you are able to accurately predict market movements and profit from them.

We hope the above tools can help you get started with whale tracking. Be careful if you base your entire strategy on whale movements, as some whales tend to leverage their power in the markets.


Source link

Share.

Comments are closed.