How To React When Crypto Whales Surge To Altcoins

Just as Elon Musk bought Twitter and revitalised the altcoin market with the rejuvenation of Dogecoin – the popular memecoin rose by 40% in the immediate aftermath of Musk’s Twitter deal – a number of prominent crypto whales have been making waves.

Apart from jumping onto the DOGE bandwagon, however, recent analytics have shown that whales are more interested in two native Ethereum tokens, KNC and LINK. KNC has seen key wallets holding 1m to 10m in the last three months, with whales recently adding 20% of the supply into their holdings. In the last 24 hours (4/11/22), LINK has recently risen by 5.22% to trade at $7.20.

What Are KNC And LINK? 

KNC is the coin of the Kyber Network, which is a blockchain exchange that allows instant swaps of ERC-20 tokens and attains its liquidity without involving third parties. Despite the fact it has dropped in value by more than 40% in the last 90 days, the whales have seemingly ignored the downward trend. 

LINK is the native token of the decentralised oracle network, Chainlink. According to reports, as many as 458 addresses have recently accumulated at least $700,000 worth of LINK tokens, which is the highest number of addresses with LINK tokens since 2017 – which was the year LINK became available for public trading, meaning this is a five-year peak. 

Why Are The Whales Investing In KNC And LINK? 

For any crypto investor who has carefully planned out their portfolio and is buying relative to the current bear market, this may seem like a strange series of events. After all, with DOGE rapidly proving itself to be a solid investment – a $1,000 dogecoin purchase on January 1^st 2021 would be worth $121,052 today, which is a gain of more than 12,000% – why would the whales go against the tide and invest in two altcoins that are not seeing rapid gains? 

Even Bitcoin and Ethereum haven’t been seeing the growth Dogecoin has. The price of Bitcoin, for instance, grew 95% over the same period, meaning a $1,000 purchase of BTC would be worth $1,953 in comparison. But understanding whale movements often goes far deeper than what is popular and reliable at the time of surges. 

Of course, Dogecoin is popular now – especially with many speculating an announcement from Musk that it would become a form of payment on Twitter – but the rally is not necessarily going to last. Dogecoin was never meant to be a payment system. It is a memecoin. The price hike is similarly fuelled by excitement on social media platforms rather than economic incentives. 

KNC and LINK, for instance, have been chosen by the whales due to the price movement compared to market value. Tokens like LINK, for instance, have a negative MVRV reading, which means that the token is technically undervalued. With the price often being correct to the fair market value, a trend correction can be aided by pressure from whale surges, which is why they are accumulating.

Is It A Good Idea To Follow The Whales?

The question of whether to follow whales when they make surges like this is multi-faceted, and it cannot be answered easily. For starters, it is important that no investor makes any assumptions. Say, for instance, that a whale has impacted the market by selling $20 million of a $100 million ETH holding. This would most likely aggravate the price of Ethereum, but money can be moved for a variety of reasons, such as covering a personal expense or for tax reasons. There can also be whales who will influence the market to work in their favour, using their leverage to orchestrate a market crash or buying a heavily shorted coin in order to shoot prices higher.

In this way, it is important to understand certain influencers before choosing to follow them. There are a number of crypto whales in the market – some may be value investors, while others might be activists. It is the investor’s job to know exactly which whales are surging towards altcoins and gain enough insight with the data they are using to increase confidence before following.

A lot of the time, crypto whales may provide excellent insight into upcoming crypto projects or coins that are worth tracking. Shiba Inu, for instance, has been massively propped up by Ethereum whales for a while now, with a recent scoop of $35m to increase the price by 15% in under a week. Before following them, however, it is important to understand how that investment might work with your usual crypto trading strategy. 

Whales have the money to hodl their portfolio, or use trading techniques which would be untenable amongst average investors. If you are a regular day trader, then following certain whale movements might be unwise financially, as their movements and strategies do not align with your own.

How Do You Follow A Crypto Whale? 

If you do decide that whale movements are worth tracking and following, then the best way to do this is through a crypto whale tracker tool. For starters, on-chain analysis can give investors an easy way to analyse blockchain transactions. It involves looking at transaction values and block sizes – if a transaction value is high, that means a considerable amount of tokens has switched wallets, with a large block size indicating a large amount of data. 

This can all be followed using a whale tracker tool which makes sense of the data and pinpoints these whale movements. It does the work for you, so you do not have to spend time finding the whales and analysing the data yourself, and it also does real-time tracking, meaning your reaction can be fast, and you can take advantage of the opportunities while they are happening.

It is important to stress, however, that the larger budgets of whales mean that they can take risks which most traders can’t. They are also not the only indicator of a change in value. There is plenty of activity that affects the market, with whales being just one example. It is important to keep your attention on the market as a whole and assess everything before gleaning inspiration from whale movements.