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  • 12 Jun 24

Decoded: Tracking Whales in the Cryptoverse with On-Chain Analysis

This guide dives into whale hunting – the art of tracking major cryptocurrency investors. Learn how to use on-chain analysis tools to spot whale movements and potentially leverage their insights.

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The cryptocurrency market pales in comparison to other financial and commodity markets.

For instance, the market capitalization of gold exceeds $11 trillion, which is eleven times larger than the cryptocurrency market.

Consequently, the cryptocurrency market is much more susceptible to manipulation. Therefore, it's a fantastic idea to keep tabs on the movements of whales, who are individuals with substantial capital holdings.

In this article, we will explore the services that can be utilized to locate and monitor whale wallets, learn how to analyze their actions effectively, and leverage them for our benefit.

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Getting Started with Whale Hunting

There are several tools available for analyzing on-chain information, with the most popular ones being:

  1. Blockchain explorers, such as etherscan.
  2. Portfolio trackers: Nansen, Debank, Zapper.
  3. Dashboards for analyzing DeFi protocols: defillama.

Utilizing Blockchain Explorers

Many people mistakenly conflate cryptocurrency anonymity with transaction confidentiality. However, most blockchains rely on public ledgers that reveal every transaction and a wealth of associated data to anyone who knows how to access it.

Raw blockchain data can be quite challenging to comprehend. This is where blockchain explorers come to the rescue.

Etherscan is one of the most widely used explorers. Its name indicates the blockchain it examines. Similar products exist for almost all blockchains, including BscScan, Blockchain.com, Solscan, and more.

Let's delve into explorers using Etherscan as an example. On the main page, you will find essential Ethereum data, such as market capitalization, current exchange rates, total transaction count and throughput, transaction charts, details of recent blocks, and more.

Etherscan home page
Etherscan home page

Scanners provide a means to access more in-depth information, such as:

  • Token technical specifications
  • Address owners
  • Previous token supply
  • Maximum supply
  • Token transfers
  • Token holders and more.

Among these options, the most intriguing is the page dedicated to token holders. This tab displays all token holders in descending order based on their quantity or percentage of ownership.

This functionality allows us to identify prominent token holders at the time of the latest block addition.

However, this path caters to the tech-savvy and those who relish complexity.

How to Utilize Nansen

Nansen is a tool that allows tracking of individual tokens and whales. The "Smart money" feature provides a comprehensive database of nearly 4,000 balances on the Ethereum network.

It serves as an all-in-one service that handles data collection, while the user's role lies in correctly interpreting the data to make informed decisions.

The primary drawback of Nansen is its cost. The basic subscription is priced at $150 per month, with a $10 option available for a 7-day trial period.

The tracked wallets include numerous whales, investment funds, and successful past players.

By "successful players," they refer to those who have recently achieved significant profits and identified early opportunities in various domains, be it betting, liquidity provision, NFT trading, or cryptocurrencies in general.

Alameda Foundation Wallet Page:

Alameda Foundation Wallet Page
Alameda Foundation Wallet Page

Using the "Smart money" feature, we can track significant changes in $USD volume per token across three different timeframes. This helps to determine whether smart money has been selling or buying the token over a specific period of time.

Shifts in Asset Allocation on Balances:

Change in asset allocation on balance sheets
Change in asset allocation on balance sheets

The combination of this functionality with the Nansen Token God Mode offers a wide scope for research. You have access to comprehensive information, including recent movements, holder distribution, smart money positions, and significant transactions.

Token God Mode Page:

Token God Mode Feature Page
Token God Mode Feature Page

The initial section of this page assists in detecting whales through notable fluctuations in token holdings. However, whales can also be identified using the "Transactions" feature.

Transactions Tab
Transactions Tab

We can select any wallet, copy it and go to Debank.

Using Debank

Now, let's explore Debank functionality further by examining the activities of a particular whale that I have been monitoring for the past six months.

0x9026a229b535ecf0162dfe48fdeb3c75f7b2a7ae

The homepage of Debank with the Portfolio tab open:

Debank home page with Portfolio tab open
Debank home page with Portfolio tab open

The homepage of Debank with the Portfolio tab open reveals that a prominent investor holds approximately $25 million across various networks, DeFi protocols, and assets.

While the page features five main tabs, our primary focus lies on the Portfolio and Transactions sections.

Based on the investor's asset holdings, it becomes evident that they are a DeFi enthusiast seeking opportunities to maximize liquidity with high yields. This notion is further supported by their transaction history.

Monitoring their movements can serve as a valuable signal indicating which protocols offer the most attractive APR, according to this investor's perspective.

Locating a reliable whale to follow for trading purposes will require a significantly greater effort.

Detailed analysis of transaction histories, including dates, purchase and sale prices, successful trade volumes, intervals between acquisitions and market pumps, sales and dumps, and other factors, becomes necessary.

In many instances, it is possible to identify wallets that participated in seed rounds, explore their interactions, and delve deeper into the network. These insights can then be used to establish connections between wallets, track their movements, and draw meaningful conclusions.

Whales typically do not liquidate their entire positions at once, as they require sufficient liquidity. Therefore, accurately anticipating their sales becomes crucial, enabling one to exit the market with a smaller position more easily.

It is important not to blindly follow every move made by whales, as smart money may not always be infallible. Even the most experienced investors can make mistakes.

For instance, I closely monitored the wallet of a particular whale who was accumulating $GPT tokens. Over the course of a week, they amassed tokens worth around $7 million. Based on their previous successful maneuvers, I believed they possessed insider knowledge, prompting me to enter a position as well.

Unfortunately, the whale ended up closing the trade with a 30% loss, while I am still enduring a significant decline of over 80%.

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Basic Guidelines for Following Smart Money

  • On-chain analysis is a valuable tool, but it should be complemented with other market analysis strategies and your own expertise.
  • Whale watching is an effective method for identifying early opportunities, but it's important to evaluate a project's merits independently of whale involvement.
  • Nansen is proficient in filtering exchange wallets and funds, and you should also employ similar filters.
  • Gain an understanding of tokenomics, including unlock charts and token distribution, to mitigate the risk of price manipulation by whales.
  • Avoid relying solely on the actions of a single whale. Monitor a significant number of whales, preferably around 50, and take note if a substantial portion of them show interest in a particular asset.
  • Stay vigilant about the investment decisions, accumulation patterns, and fund movements of whales.
  • Develop the ability to identify scam transactions. For instance, there have been instances of scammers utilizing Debank's functionality to distribute fraudulent tokens, creating the illusion of whale involvement. It can lead to unfortunate financial losses for those who monitor such wallets.
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