Crypto Whale Watching: How to Catch Market Insights and Interpret Them
For years, people of all ages have flocked to different corners of the world to take part in the exciting tourist activity of whale watching. Soon, there will be another type of whale watching that gains mainstream popularity – one which doesn’t require you to leave your home, to get on a boat, or to purchase seasickness pills in advance.
As interest in cryptocurrency grows, so too has the number of participants (both wealthy and otherwise) who have entered into the space. “Crypto whales”, which are generally defined as an individual or organization that is holding a large amount of cryptocurrency, can severely impact the markets with any moves that their wallets make (similar to how a whale can significantly impact its surrounding ecosystem with its movements and behavior).
What Defines a Crypto Whale?
While there is no precise definition of how much of a particular cryptocurrency that a wallet has to hold to be considered a crypto whale, within the Bitcoin space, it is generally accepted that holders of 1,000 BTC or more can be considered a whale. Using recent exchange rates (May 2021) of 1BTC/40,000USD, a Bitcoin whale would be holding over $40mUSD worth of Bitcoin.
Different measures can also be implemented to define a whale. For example, the amount of currency in total being held by a group of people. During mid-2019, it was determined that one-third of all ether was being held by only 376 people. Other popular protocols, such as Cardano (ADA), and Tron (TRX), also have their own whales, with the public’s own perception on how large the wallet needs to be before being considered a whale.
While crypto whales themselves are a relatively new phenomenon, a sub-class of crypto whales is already emerging, and given enough time, will likely rival the largest whales in the crypto space in the near future. DeFi (Decentralized Finance) whales, or wallets which have moved their assets into well known protocols such as Uniswap or Compound, are leveraging the new decentralized world of finance to make an astonishing amount of passive income on a daily basis. Using the power and leverage of DeFi, many whales can now deploy their crypto assets in an effort to earn additional income. Many of these strategies do not require the whale to relinquish their crypto assets, thereby creating an ideal situation where the holder can continue to keep their assets while passively earning interest and/or borrowing additional funds to invest by collateralizing their crypto holdings.
How Whales Single-handedly Can Move a Market
Incredibly, just the sheer existence of a crypto whale can have an impact on the market, regardless of whether the whale is doing anything. Even small movements (or appearances) of crypto whales can cause the market to react, especially if the public identity of a whale is known.
With simple supply and demand, whale HODLRS (Hold on For Dear Lifers) can impact the cryptocurrency markets simply by holding an enormous volume of crypto in their wallets. Depending on the amounts held, this shrinks the available pool of crypto available for a particular blockchain, and thus driving up the prices of the remaining currency. Famous HODLRS such as the Winklevoss Twins, who likely hold over 100,000 BTC based on recent reports of their Bitcoin fortune, are just one of many Bitcoin whales out there who are responsible for limiting the available of BTC in the marketplace.
Unsurprisingly, whale movements (execution of transactions into, and out of the marketplace) also can have an enormous impact on the markets. Analogous to the world of stock markets, when it is announced that an investor like Warren Buffett makes a trade (buy or sell) in a company, the related stock price then moves in unison (positively or negatively) depending on whether or not Mr. Buffett’s trade signals that the security may be over or under valued. Crypto whales can do this, and more, potentially manipulating the price of the cryptocurrency by creating “price walls.” Depending on how these walls are used, they may allow the whale to make trades of the underlying cryptocurrency at prices that the whale desires.
Sometimes, a crypto whale makes a splash just by “resurfacing” through movements in their wallets. Such whale sightings often leave the public guessing as to why a whale may have suddenly taken action on their previously dormant wallet. Coordinated with recent news events, anticipated changes in the underlying blockchain, or overall public sentiment, these movements have the ability to propagate serious rumors within the crypto community. This creates another form of instability in the markets as traders look to analyze why a crypto whale has resurfaced.
Crypto Whale Watching
Bitcoin and Ethereum, among other popular cryptocurrencies, are known as public blockchains, which basically mean that anyone can join and participate in the blockchain itself. Public blockchains also have public ledgers, which allow everyone to see all of the transactions on the blockchain, including the wallets themselves and the crypto balances in those wallets.
Various trackers are available online for Bitcoin, Ether, Binance Smart Chain, Solana, and more. Visiting each of these trackers easily allows anyone to see the latest transactions which have posted to the respective blockchains.
But How to Spot a Whale
Unlike a typical whale watching trip, where tourists can only hope to spot whales during their boat ride, technology has provided crypto whale watchers to simply be alerted any time a crypto whale makes a movement. As noted previously, thanks to the public ledgers of the most popular blockchains, the wallet addresses of all participants on the public blockchain are visible for anyone to see, including crypto whales. Along with this visibility, all transactions going into, and out of the wallets are also available for the public to see.
Free tools such as those provided by PARSIQ allow for anyone to set up alerts on any crypto wallet on the blockchain. In particular, PARSIQ supports the monitoring of wallets on several chains, including: Bitcoin, Ethereum, Dash, Algorand, Binance Smart Chain, Houbi Eco Chain, Solana, and Polkadot.
With PARSIQ, users can sign up for a free account, identify the whale wallets that they might want to monitor, and simply set up an alert in the PARSIQ tool by cutting and pasting the wallet address. Alerts can then be sent directly to a Telegram account or Google Sheet, or for the more sophisticated trader, webhooks can be configured to a trading bot to potentially execute pre-planned trades. A more detailed tutorial can be found here, under the Whale Watching with PARSIQ section.
Instead of staring endlessly at Etherscan for whale movements, interested crypto whale watchers can simply wait to receive an alert and then act instantaneously on the information coming from these wallets.
The Benefits of Crypto Whale Watching
Setting up alerts to monitor crypto whale movements can provide additional insights into the cryptocurrency markets. Whether a crypto enthusiast is only just entering into the space, or has been following the markets for several years, the movements of whales and their correlation to recent crypto news can provide traders with an another vector point of information to incorporate into their trading strategies.
Among some of these inputs, the public may learn that some crypto whales may start leaving one blockchain for another, thus sending bearish signals for one chain while creating a bullish signal for another. Or perhaps the market looks oversold, and crypto whales see an opportunity to pick up additional crypto at a discounted price. Additionally, many traders often struggle with when to enter and exit a trade. Following the movements of crypto whales may provide some additional useful information for these traders as they consider the timing of their own trades. After all, when whales move, it’s best to take notice, as the entire landscape can change drastically.
With each passing year, the benefits that blockchain technology and cryptocurrencies bring to the world become more and more clear. Participants and money inflows into crypto are the highest they have ever been, with the trend moving upward over time. Since the crypto market cap highs of 2017, the market cap of crypto has more than doubled, with well known currencies such as Bitcoin and Ether leading the way, and newer entrants such as Binance Coin and Dot joining in recent years.
While cryptocurrency has come a long way, there continues to be a significant amount of instability in the markets as the various blockchains continue proving their use cases for the long term. Interested participants in the crypto space would be best served in gathering as much information as possible prior to investing in a currency – including understanding the movements of crypto whales.
Featured image: cryptonetwork.news