Original Author: CoinGecko - Joel Agbo

Original compilation: BlockTurbo

Key Takeaways

• Tracking a cryptocurrency wallet involves keeping an eye on the wallet's transactions and noting its significant transactions over a period of time or involving specific assets;
• Wallet tracking provides investors with asset movement information based on tracking transactions of major holders, which can be used to speculate on market movements;
• Possibility to filter or track selected wallets using a blockchain explorer or a special application;
• A dedicated wallet tracker is designed to provide clearer information on wallet movements and inform investors.

How to track a cryptocurrency wallet

There are three main steps in tracking cryptocurrency wallets: discovering wallets, collecting in-depth data on transactions on the wallet chain, and translating the data obtained in the first two steps into useful information. Through these, investors can learn about the actions of "smart" investors and possibly predict market movements using cues from the actions made by prominent wallets.

What are other traders buying, who are the buyers, and how well do they understand the market? If they seem to have a better understanding of the market, what are they investing in now and what might they invest in next? On a larger scale, what effect does the behavior of someone like this have on the market?

If you are wondering about these questions and how to apply them, then read on to learn more about cryptocurrency wallet tracking!

What is wallet tracking

Wallet tracking focuses on studying the wallet movements of whales or prominent traders to gain data to guide potential trading decisions.

Cryptocurrency wallet trackers are designed to make it easier for individuals to track wallets of interest, such as by sending alerts every time a transaction occurs. These trackers allow you to track the activity of your chosen wallet in real-time. Cryptocurrency wallet trackers connect to third-party APIs and access various on-chain cryptocurrency data sources to obtain information about transactions; this information is then packaged and presented to users in a more useful form.

The cryptocurrency wallet tracker is designed with customizable features such as push notifications that alert users whenever the tracked wallet performs a transaction. According to the design, the cryptocurrency wallet tracker can display basic information about the transaction (such as the type of transaction and the amount involved) as an instant alert on a messaging application such as Telegram. This enables users to react quickly without searching for transaction details using blockchain wallet browsers like Etherscan.

How to find the wallet to track

What should you focus on before tracking your wallet? The answer depends a lot on what you are tracking your wallet for, but here are a few things investors often look for when tracking their wallets:

Past Investments

When you consider adding a smart wallet to your wallet tracker, you can check its investment history to see what assets they have sold in the past and how they are managed. See when you bought and when you sold, and how much you gained or lost as a result. This is a good way to assess whether a wallet is "smart money". If this wallet is making big profits on most of its previous transactions, then they might be worth some attention.

Profit/Loss Ratio

When you’re looking for a smart wallet that can copy trades, it’s important to consider their profit/loss ratio, which measures the average profit from winning trades versus the average loss from losing trades over a certain period of time. Research the assets in their custody and their value, and track transactions related to the assets in the wallet to determine whether the wallet is in profit or loss. If the wallet makes a profit on the assets it manages, then you might want to track its transactions.

Transaction Flow

Where does the money in the wallet come from and where does it go? If a wallet regularly receives deposits of different sizes from different wallets, then it is likely an exchange wallet. Blockchain explorers attempt to label these transactions and wallets, but may miss them in some cases. Vesting wallets can also be identified by the tags on their transactions. Under normal circumstances, individual wallets should have less transaction frequency, and individuals own fewer wallets.

Interaction protocol

Personal wallets generally interact with a small number of exchanges and others. Team and project wallets are more likely to interact with more specialized protocols and perform transactions like staking, mass distribution, and staking reward distribution.

Find a wallet to track

Choosing a wallet to track depends on your goals and wallet availability. If you just want to track the movements of the top holders of a smart contract project that you wish to invest in or have invested in, then finding a wallet to track will be relatively easy. However, if you wish to track "smart money" investors or other famous figures, the procedure may be slightly more complicated.

Based on the previous considerations, let's try to find some wallets to track.

How to find top holders using a blockchain explorer

You can use the explorer of the blockchain network that the asset runs on to find the wallets of the top holders. Explorers for older blockchains like Bitcoin and Litecoin often have a "rich list" feature that ranks holders in order of the assets they have in custody. The EVM network has similar functionality for smart contract tokens.

To find the top holders of a smart contract token using the web's browser, you first need to get the asset's smart contract address and visit the browser for more information. Here, we will use the Arbitrum token on the Arbitrum Layer 2 network as an example.

Copied the smart contract from CoinGecko's asset page, of course you can also get the asset's smart contract address through the project's official website and social media profiles.

Visit the Arbitrum Explorer, navigate to the Arbitrum Tokens page, and then to the Holders section, where the list of holders is sorted by their holdings. Note that the highest ranking wallets are likely to be official wallets and exchange wallets.

Identifying "Smart Money" Investors

Finding "smart money" investors may require more research, as well as additional tools to simplify the process and increase its effectiveness.

Using Blockchain Explorer

Some of the top holders of successful smart contract projects are a good starting point for your search for "smart money" investors. To illustrate this, we'll take a look at the Camelot token (GRAIL) on the Arbitrum network, which has been increasing in value over time:

Looking at the top 50 wallets, most seem to belong to exchanges, vesting wallets, and institutions that may be related to the project. You can detect this using transaction labels and transaction frequency. Here managed to single out the wallet at number 33 on the list of holders (at the time of writing).

Looking at the wallet (0xD956) there are about 68 GRAIL tokens under his custody. 22 of these tokens were purchased on January 17, 2023 for approximately $241 each. GRAIL is trading at $1899 at the time of writing - that's more than a 780% profit.

0xD956 also bought 62 GRAILs for about $550 each on Feb. 2, having previously sold 15 GRAILs for over $480, achieving about 100% from his first purchase profit.

At the current value of GRAIL tokens, the February purchases have made a profit of over $70,000 at this time. This is an example of a "smart" trade. This example is for illustration only. Cryptocurrencies are volatile and this is not financial advice.

social media

Social media, the internet, and peer-to-peer interactions are also great ways to find wallets to track. An example of such a platform is Lookonchain. Lookonchain tracks "smart money" wallets and presents their findings on their Twitter profile. If these wallets appeal to you, you can also add them to your tracking list. Again, this is not financial advice.

Indicators to watch when tracking wallets

Now that you've found a smart wallet, here are a few things you should keep in mind as you track your wallet.

Trading Assets

What assets are your smart investors holding, buying or selling? Watch these for more data on how smart money investors feel about assets. If the asset is popular among smart investors, then they may think that the asset will appreciate in value in the long or short term. *Note, this is not strong data to rely on, further research on the asset is recommended.

Transaction Type

Watch to see if the wallets you track are buying, selling, claiming rewards, or receiving incentives from projects or other reputable institutions. Depending on why you're tracking your wallet, this data can give you insight into financial transactions, their involvement in the project, and more.

Transaction Direction

If your wallet is sending focus assets to a centralized exchange, they may be about to take some profits. If you are following multiple "smart money" investors and they are going in the same direction (especially if the asset's price has risen), then the most likely answer is profit-taking; May be on the way out of the market. If the direction is reversed, then "smart money" investors may be buying into the asset, and it may be one that deserves further research.

Amount of the transaction

To assess an investor's belief in an asset or the impact of their trades on the overall market, the fraction of the asset in a trader's portfolio, the percentage of the asset's total supply they hold, and the allocation relative to wallet size are Indicators worth looking at. Like 0xD956 above, a purchase at $40,000 is a sign of conviction, especially for individual investors. Depending on the liquidity available to GRAIL at the time of purchase, such a transaction could have a significant impact on the market.

Transaction Frequency

Your smart money wallet might just be day trading on a decentralized exchange. This could be market manipulation or normal day trading, but a good way to detect it is to see how often it repeats a particular trade or trading cycle. If it repeatedly buys and sells a single asset, then the trader may be trying to take advantage of short-term changes in the asset's value for profit, or simply trying to influence the market.

How to spot a scam

Scam projects try to steal the attention of investors by sending their tokens (unsolicited) to some well-known wallets, and induce people to buy these project tokens or interact with their smart contracts. Filtering out these tokens is very important when tracking smart investor wallets. Blockchain explorers attempt to label this type of token to protect investors. In situations where this information is unavailable, tracking transaction history is a great way to detect fraudulent coins in your wallet.

Check how the smart wallet got this token - were they purchased, claimed, or received from a peer? Claim transactions are usually flagged on the EVM web browser; another way to identify a claim transaction is to track the transaction and verify that the investor paid a fee (claim fee) along the way. "Claim Wallet" should have many similar transactions.

If the investor didn’t buy the asset on a decentralized or centralized exchange, and it wasn’t sent by someone else, then it’s likely a token that exploits the reputation of the wallet owner to scam. Track the source wallet of this transaction and observe other transactions made by this wallet. Also, see if the smart contract's page provides more information about the issuing project, and if so, verify all information related to the project.

Cryptocurrency Top Tracker

Large investors are a unique class of investors. Not only do they hold a large percentage of liquid assets, but most of the time they are seen as the most informed and important group of investors. They are considered "most important" because their activities have a huge impact on the market; they are considered "most informed" because they are considered to be closer to the project team or know more about the project than most other investors More. In addition, they are also considered the biggest believers in the project.

Therefore, investors try to track their dynamics and take these into account in their investment strategies. Crypto Big Player Tracker helps investors track big players.

Big account trackers are similar to regular wallet trackers. They also work similarly. Large holder trackers connect to aggregated on-chain data through API endpoints, just like wallet trackers. A major difference, however, is the information they focus on.

Big Holder Tracker focuses only on major transactions by top holders, and the information presented by Big Holder Tracker is usually high value transactions and transactions from "wealthy" holders. A normal wallet tracker, on the other hand, presents transaction information for a user-selected wallet. These transactions can be high or low value, and any wallet can be traced regardless of their position on the holder list.

An example of a great tracker is Whale.

Portfolio Tracker

Another related investing tool is the portfolio tracker. Portfolio trackers help investors understand how their asset prices are developing. Some portfolio trackers further aggregate news and additional data about the assets being tracked and make this information available to investors. A crypto portfolio tracker like CoinGecko connects to the data feeds of cryptocurrency exchanges to obtain cryptocurrency trading data on each exchange.

Investors can use the portfolio tracking feature on platforms like CoinGecko, Debank, and Nansen to bring together their investments in crypto assets in one place and easily follow them and their related developments. Portfolio trackers can also notify investors of major price changes via push notifications or email.

Cryptocurrency wallet trackers and portfolio trackers use similar technology, but wallet trackers focus on investor behavior, while portfolio trackers focus more on the price of an asset.

Final Thoughts

Always do your own research when investing in cryptocurrencies, and tracking wallets as part of your on-chain data research can help with investment decisions. Wallet tracking may improve an investor's chances of earning gains, as the goal is to follow "smart" investors with a track record of success.

Tracking a wallet can be tricky, especially when investors are looking to use the data gained to make larger-scale decisions. This is because decisions like this require not only knowing what wallets hold, but how long they hold them or plan to hold them, and why they hold them.

Smart investors may view certain assets as non-profit-oriented investments, and therefore have no concern for making profits. However, this means that investors who track wallets may miss out on profit opportunities while they wait for signals from "smart" wallets. It is also possible that there are scam tokens that try to use wallet tracking to promote their tokens by sending large quantities of these tokens to reputable wallets to attract the interest of investors who track that wallet.

Having said that, remember that cryptocurrency investing is a risky investment and always do your own research before investing in any project. Also note that this article is educational only, not financial advice.