Study: the most important Bitcoin wallets

Before we get into it, it is important to note that you need to have a little bit of technical knowledge if you want to fully understand this study. If you are familiar with cryptocurrency wallets and whale movements then you can skip down to the study section. For those who are not familiar with these topics, we are going to give you a mini crash course on both so you can understand just how important the results of our study are to cryptocurrency and crypto trading.

What is a cryptocurrency wallet?

Cryptocurrencies are generally stored on either physical or digital wallets. Each of these wallets is a unique address on the blockchain. Since the ledger which contains a record of all transactions for a cryptocurrency such as Bitcoin is publicly available, this makes it possible to eventually determine the ownership of certain wallets, namely those belonging to cryptocurrency exchanges.

There are dozens of cryptocurrency wallets each with different features. Some such as Mycelium focus exclusively on a single cryptocurrency whereas others like Coinomi support literally thousands of cryptocurrencies. Cryptocurrency wallets make money from transaction fees which can vary anywhere from a fraction of a cent to over 10-15$USD depending on the wallet and the cryptocurrency being transferred. We recently wrote an article about our top cryptocurrency wallets for 2020.

What are whale movements in cryptocurrency?

The ability to track large cryptocurrency transactions to and from cryptocurrency exchanges is extremely valuable to crypto traders. This is quite simply because you can assume with some certainty that if someone transfers a large amount of Bitcoin to an exchange like Binance, this suggests they are intending to sell that amount. Conversely, if someone transfers a large amount of Bitcoin from an exchange to a wallet, it is safe to say that individual does not plan on selling that asset any time soon.

Wallets which hold large amounts of cryptocurrency are called whales. There are Bitcoin whales, Ethereum whales, XRP whales, etc. Some whales can be individuals whereas others are institutions such as hedge funds or even exchanges. There is a sort of implicit assumption that cryptocurrency whales are the most experienced when it comes to cryptocurrency trading. While this may not actually be the case, what they do with their money has a huge impact on the cryptocurrency market. If you move a few Bitcoin to an exchange nobody will bat an eye, but if J0E007 does, that’s a different story!

It should come as no surprise that there are dozens of APIs which track whale movements happening on literally thousands of blockchains. One of the best (in our opinion) is WhaleTrace. These tools are extremely useful to cryptocurrency traders for the reasons discussed two paragraphs ago. You can read more about whale transactions in last month’s in-depth article.

Study: which cryptocurrency wallets are important?

Although tracking whale movements is incredibly useful, it can be misleading for one simple reason: there is no differentiation between “regular” wallet addresses. In other words, wallet addresses which do not belong to cryptocurrency exchanges are simply designated as a regular cryptocurrency wallet. As you might expect, exchange wallets are characterized by high transaction volumes, a large amount of related addresses, and frequent transfer between a handful of “primary” addresses (other exchange wallets). To examine the nature of “regular” Bitcoin wallet addresses, we analyzed their behavior over the course of 3 months using data sourced from

Clustering the behaviors of non-exchange cryptocurrency wallets revealed 4 distinct profiles: regular cryptocurrency wallets, coldwallets, mining wallets, and unknown wallets. Regular wallets and coldwallets exhibit similar behavior, namely a small number of transactions with a small number of addresses. The primary difference is that coldwallets hold significantly larger amounts of cryptocurrency than regular wallets. Mining wallets are, well, mining wallets, and unknown wallets do not fit the behavior profile of an exchange, regular wallet, cold wallet, or mining wallet.  

The goal of the study was to see if whale transaction indicators can be refined to be more valuable to traders. Since it is uncertain which coldwallets or unknown wallets may belong to exchanges, we tried to graph the various pairings of these wallets with known exchange wallets. Below you can see the differences that pairings have on whale transaction data in relation to the price of Bitcoin. It seems that the activity of mining wallets has the most significant effect on price action, followed by the activity of coldwallets.

Whale movements of Bitcoin mining wallets to and from exchanges
Whale movements of Bitcoin cold wallets to and from exchanges

We hope to conduct some more in-depth research into the nature of unknown wallets. It is likely that a lot of these wallets have been abandoned, forgotten, or even their owner has lost the keys. During the 2017-2018 bull run, retail investors rushed in to invest in cryptocurrency to try and get a share of the insane profits. If a substantial percentage of these unknown wallets were created around that time, it would lend support to the idea that these wallets are a sort of discarded refuge by people who either forgot or abandoned their cryptocurrency dreams.

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