Who? What? Where? Why? Whales!!

The Challenge:

> > 1. Identify active wallets with a high balance of ETH (whales).

> > 2. Visualize the ETH transaction history of these whales in May and June 2022.

Coming to terms with our terms

• ETH: This term is actually unambiguous, save for the fact that people frequently confuse ETH the token/ currency/ gas with Ethereum, the protocol. In choosing our school of whales, we will therefore only consider ETH holdings when choosing our whales. It should be noted, however, that there could be some very large whales swimming around with only very little ETH - just enough to fuel (get it fuel, gas?) their degen activities

• Active: This can mean a lot of different things and with this kind of wiggle-room, as far as how to define this term. I chose at least one transaction of ETH. I did this because it does a good job of removing a lot of large wallets, which are mainly things like central exchanges (CEX). I feel like the potential to make one whale of a transaction (sorry I just can't help myself) makes me want to err on the side of the not so active.

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• Whale: Most people know what is meant by whale, but when doing data analysis, you need a little more than "a dude with a lot of ETH". I come from the gambling world and there, a whale was someone who played fast and loose with their large stack of chips. In general, whales seem to command more (too much IMO) respect in the world of crypto. The basic idea though is someone who has the wherewithal to move prices with their bags. This of course still isn't perfect, as anybody can sort of move the price, by being the first to accept a buy or sell offer. I chose the top 100 balances of previously defined "active" addresses, but also which were not labeled as CEX. I used the average ETH balance per wallet, over the two month period of May and June, 2022 to rank.

Above, we see the weekly, aggregate volume and transaction totals coming FROM ‘Active ETH Whales’.

• Each circle represents the total transactions and ETH volume of transfers leaving our whales’ wallets. It is counted from the labeled date for that week, so the May 22 circle represents the total transactions for the week beginning on May 22.

• We define ‘Active’ as ‘Having initiated at least one transaction’.

• The top 100 whales were chosen, based on their average balances over the period in question (May and June, 2022).

Initial Insights

This bird’s eye view of the two key transaction indicators gives us some insights into where to go from here. Here is where I ask the question: ‘what jumps out at me from this graph?’. Answers:

1. The two weeks to focus on here are the weeks of May 1 and Jun 12. This is unsurprising as it coincides with two significant market meltdowns, strongly effected by general bearishness and macro-economic conditions but fueled in no small part by major scandal/ scams. This is convenient as I was a bit concerned, as to how I was going to fold the ‘Hacks, Scandals and Scams’ theme into my work! Rember, high transaction volumes here indicate transferring ETH somewhere. No doubt, much of this is transferred to those exchanges, or exchanged for USDC on a DEX (decentralized exchange)

2. That is a heck of a lot of transactions for 100 addresses! Unfortunately, there isn’t a simple way to quickly distinguish between contracts and actual “external” addresses, meaning an address owned by an individual entity simply interacting by exchanging ETH or other tokens. We need to break this down.

Distribution of Balances:

All Addresses vs Active Addresses(>1 send)

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Above:

Sure enough the whale transaction volume out (WTVO?) spikes in a big way as the crypto market was far from immune from the fallout of the Terra debacle. This snapshot seems to indicate that we can use our new WTVO indicator as a proxy for price. It is unlikely, unfortunately for those on the never-ending quest for the alpha holy grail, that this will be a predictor and is more of an effect than a cause probably, but, you never know…

Below:

While crypto was still reeling from the shock of the rapid demise of the Terra ecosystem, where the naysayers warnings of a depegged UST proved prophetic, centralized parties, who play the crypto game, Three Arrows Capital and Celsius. Got caught gambling with other peoples’s money. The whales certainly seem to have led the way in escaping this time. The entire upward blip in the weekly chart can be accounted for by the first day of a three day plunge in price

Sure enough, we have some entities making a large amount of transactions. Should we count these? They certainly are active entities with large balances!

Concluding Thoughts:

We spent a good deal of time on the actual methodology as compared to honing in on any particularly strong insights. That said, it seems that it may be worth while to examine the correlation between large transfer movements of these whales and price spikes.

Further research into the origin of those large addresses that appear in the donut chart and deciding whether to try the data again with those addresses removed, woudl be a good next step.

We could also look into

• the destination of the transfers

  • CEX?
  • WETH?

• Proportion of allocation towards stablecoins vs ETH / Other Tokens

• Comparison of the flow both in and out of these addresses

• Experiment with different definitions of whales.

  This is a Tip Notice which I just discovered now.

Appendix: Some bonus stuffs and things. We look at the distribution of balances of all addresses versus active addresses