How To Follow Whales

Louis Sykes
February 2, 2022

If you've been involved with crypto, you've probably heard the term "whales" thrown around countless times. There's an almost conspiracy-like aura surrounding this cohort of Bitcoin holders.

With an incredible amount of attention placed on this trader cohort, it's important to understand their role in driving price action, macro trends, and more importantly, following their movements.

So, first things first, what even is a "whale"?

A whale is simply a holder of more than 1,000 Bitcoin $BTC.

These are the largest players in the entire asset class by the dollar amount of their holdings. Whales are just another cohort among many others. 

These are detailed in the graphic below:

Most holders of Bitcoin fall under the "shrimp" category, with 95% of all entities on-chain holding less than 1 BTC. Note that the number of whales is incredibly tiny.

Though whales may be small by volume, they are large by their holdings.

Below is the Bitcoin supply distribution. This is calculated by taking the holdings of each group as a percentage of the total Bitcoin supply.

There are two inferences we can make from this chart.

  • Whales hold approximately 50% of the float, considerably more than any other cohort.
  • Whales gradually divest their holdings over time, while shrimps (retail) always accumulate. Whales have primarily sold into rallies and accumulated in bear markets.

The second point is the more important when using this data to ascertain a directional bias.

Shrimps always buy no matter what, while whales enter and exit strategically.

Here's a historical look back at how whales have accumulated and distributed at different periods in Bitcoin's history. Whale holdings are depicted by the orange line.

The takeaway from this history of buying and selling is that following whales certainly gives additional edge. At the same time, they don't perfectly time macro tops and bottoms.

But looking closely over the last few years, following whale buying/selling has given traders a significant edge in positioning and de-risking.

Below is an oscillator view of whale holdings adjusted for known entities (exchanges, WBTC, funds, etc.) that tracks the 30-day net movement of coins entering/exiting wallets belonging to whales.

Following the 2018 bear market capitulation event, whales were seen strongly buying. Following a run-up in prices, they de-risked and sold back the coins they'd bought a few months prior at notable profits.

This same buying wouldn't be seen until after the onset of the pandemic, where whales were in an incredibly strong regime of buying until they divested before the May sell-off.

Even in recent months, following whale money flow has been an incredibly valuable indicator.

So, what are the main takeaways?

Following whales is relatively simple, but it involves some level of nuance.

  • Whale buying/selling can be easily tracked by evaluating the change in holdings of entities carrying over 1,000 BTC.
  • Whales have not perfectly timed macro tops and bottoms in the past. Unlike shrimps that accumulate no matter what, whales sell into strength and accumulate in bear markets.
  • A significant proportion of entities hold less than a single Bitcoin, but the majority of the coins are held by whales.
  • It's vital to deduct the holdings of known entities from whales, as these are custodials that hold Bitcoin on behalf of millions of users. While whales control the majority of Bitcoin's float, if left unadjusted for known entities, it would seem to suggest that Bitcoin's supply is highly concentrated. This is not the case.

All data was supplied by Glassnode.

If you enjoyed this educational piece, be sure to check out our recent primers on other key topics:

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Thanks for reading, and please let us know if you have any questions!

Allstarcharts Team

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