Eliminate information asymmetry! Utilize tools to track whales and gain Alpha.

Due to information asymmetry, crypto whales are always able to discover Alpha ahead of time. However, with the help of certain websites and tools, observing the behavior of whales has become easier. Crypto researcher pothu shared some analysis methods in his article.

Whale Behavior Analysis

When whales transfer assets, especially involving large transactions, it may have an impact on market prices. This article will analyze the following aspects:

• Types of whale transactions
• Market depth
• Finding suitable wallets to track
• Wallet analysis

Whale Trading Behavior

1. Transferring Cryptocurrency to Exchanges

Identifying exchanges on Etherscan is quite easy as they are usually tagged. The image below shows 400 ETH received by the Kucoin exchange.

When cryptocurrency is sent from a regular wallet to an exchange wallet, it often indicates a sell-off. If tens of millions of dollars worth of funds are dumped through an exchange, it can create strong selling pressure, leading to price drops.

2. Withdrawing Cryptocurrency from Exchanges

Conversely, if a large amount of cryptocurrency is withdrawn from exchanges, it will exert upward pressure on prices. The image below shows 2,000 ETH being withdrawn from Kucoin.

If whales withdraw a particular coin from an exchange shortly after depositing it, the likelihood of them selling it is lower. If a sufficient number of whales withdraw the same coin at the same time, it reduces the market's supply, which is a strong bullish signal for the price.

3. Transfers to Non-Exchange Wallets

Some whales prefer over-the-counter (OTC) markets for trading due to the large transaction amounts causing slippage on exchanges. They conduct trades at fixed prices in OTC markets, which typically have less impact on the market but make it harder to track large transactions in real-time.

To track whale transactions, services like Whale Alert on Twitter provide real-time updates on large transactions.

Market Depth

After understanding whale trading behavior, it is crucial to determine how much trading volume is needed to influence market trends. Higher market depth requires more capital, and vice versa.

You can easily check market depth on platforms like CoinMarketCap or CoinGecko. The image below shows the amount of funds needed to raise or lower the price of ETH by 2% on a specific exchange.

If you see $10 million worth of ETH transferred from a wallet to an exchange with a market depth of $20-30 million, the impact on price can be negligible. However, for most altcoins with lower market liquidity, a $10 million sell-off could have a significant market impact.

Finding Suitable Wallets to Track

Etherscan and DeBank are useful tools for wallet analysis. Etherscan allows you to look up any ERC-20 token to view key data such as market cap, trading volume, and number of holders.

You can also track fund inflows and outflows, changes in holders, etc. The image below shows detailed information on a whale holder of the UNI token.

If a significant amount of tokens is held in centralized exchanges, it may signal whales preparing to sell, which is a negative sign for market prices.

When searching for wallets to track, DeBank's Web3 Social Ranking feature lists numerous whale wallets for ERC-20 tokens.

In addition to observing their holdings, you can analyze their trading records to identify high-probability traders worth tracking. This information can also be observed on Etherscan's ERC-20 Token Txns.

Wallet Analysis

The market impact of whales versus regular users engaging in similar trades can be vastly different. For instance, if the largest holder of a meme coin dumps $10 million worth of that coin in the market, it would have a more negative impact than if a smaller investor did the same. If a token is held in significant proportions across multiple whale wallets, it becomes a highly trackable asset. Pothu, for example, cites FTM as a coin held by many whales, suggesting its value might be undervalued.

However, scammers or malicious actors may send tokens or NFTs to whale wallets through airdrops to obfuscate their intentions. Therefore, verifying the sender of tokens is crucial. If someone sends large amounts of the same token to different wallets in a short period, they may be trying to create the impression of whale holdings.

Ultimately, the best approach is to monitor recent buys and sells by whales and compile your own list of whale wallets for observation.