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Crypto whale watching: Why investors should track them to generate profit

Moneycontrol logo Moneycontrol 19-07-2022 Murtuza Merchant
Crypto whale watching: Why investors should track them to generate profit © Moneycontrol Crypto whale watching: Why investors should track them to generate profit

Imagine swimming alongside a whale in the middle of an ocean — the experience can be reassuring or frightening, depending on your proficiency at swimming and your comfort with the largest mammal on earth. Now, apply the same concept to the crypto world and you’ll get the picture of what it could mean to follow the crypto whale.

Crypto whales is a term used to describe investors with a disproportionately large holding of a cryptocurrency. They can influence the price of their respective crypto tokens with their buying/selling power and disrupt the crypto markets with relative ease.

It is important to spot such whales and track their trading activity to profit from it or to simply avoid being on the losing side of a trade.

Tracking crypto whales

Over the years and through the many bull and bear cycles, cryptocurrencies with large market capitalisation such as Bitcoin (BTC) have usually reacted in the direction of major trends when crypto whales have been in action. While some meme crypto tokens like Dogecoin (DOGE) or SuperDoge (SUPDOG) can fluctuate wildly when crypto whales are in action, these large investors exert considerable influence on price by means of their trading volumes.

This makes it important for retail crypto investors to track the largest wallets and stay abreast of major changes in their holdings so as to align their trading strategy accordingly. There are dedicated crypto websites such as Watcher.Guru that offer crypto whale tracking services and a host of other analytics to guide the average crypto investor. This site provides unparalleled coverage of automated cryptocurrency whale tracking. It also allows users to vote for their favourite tokens and provides helpful insights into the most active cryptocurrencies.

In the same way, analytics platform Whalemap offers intuitive trading charts to help understand crypto whale trading activity. Monitoring these top crypto whales in terms of the size of their holdings and understanding their behaviour can help crypto investors to gain an edge in the most volatile crypto markets.

Whale dashboards

Investors tracking large crypto wallets have a higher probability of spotting large trades early, helping them to take quick decisions to profit from the movement. If a Bitcoin whale executes a large buy order near a critical price support level, it is a cue for retail investors to follow and invest for a probable bounce towards higher price levels. This necessitates tracking live trading activity and involves a lot of tedious processes if done manually by checking order book changes.

One can access major exchanges like Coinbase and Binance to build a watch list and constantly watch for signs of large trades.

Alternatively, crypto fans and investors can access free services from firms like Whale Alert, which provide dynamic alerts and tracking services for a plethora of cryptocurrencies. Available on Twitter as @whale_alert, followers can expect prompt updates every time a crypto whale makes a splash in the crypto markets. With more than a million followers across social media platforms, Whale Alert uses bots to post real-time transaction updates for traders, developers, and blockchain enthusiasts.

However, for investors who want to access a live trade feed and enjoy the freedom to filter data dynamically, the CoinLobster whale-watching dashboard is a better alternative. With users being able to check for transaction volumes above a customisable threshold, CoinLobster offers a combined order book visualisation by compiling data across exchanges and can overwhelm novice investors with the range of tools on offer.

Understanding sentiment

While blockchain technology may hold the answers to a decentralised and more equitable future, cryptocurrencies are subject to market volatility and trends just as most traditional asset classes like equities.

In the current bear phase where most cryptocurrencies have significantly come off their peaks, data analysis indicates that BTC whales are still reluctant to lap up the most popular cryptocurrency at present prices. This indicates a cautious approach and should be read correctly so that investors do not rush in to take fresh positions or average their holdings.

On the other hand, if crypto whale buying volumes trend higher with increasing token prices, it can be taken as a sign of a bullish reversal and should be acted upon for short-term gains.

Thus, tracking transaction volumes can be beneficial for crypto investors, not only to understand the hottest tokens being traded but also to make prompt investing decisions in case of trend reversals.

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