How to track cryptocurrency addresses: a complete guide

Even though the cryptocurrency industry has changed significantly in recent years and become more regulated, criminals still use digital money for money laundering, extortion, drug trafficking, circumventing sanctions, and financing terrorist groups. Therefore, investigators must be able to work with cryptocurrencies and use them as evidence in investigations. GetBlock AML Research reveals the details of cryptocurrency address analysis used in investigations.

Imagine that a suspicious cryptocurrency address appears in a case. Or it is known that a specific payment was made in cryptocurrency, but it is unclear how to track it. Where to start? What to look for? How to turn data from the blockchain into useful information for the case?

This material provides a practical framework for investigations involving cryptocurrencies. It explains two different approaches that are used depending on the situation, and describes specific techniques to help obtain the necessary information. The most important thing is to understand that cryptocurrency investigations are not as complex and technically confusing as they may seem at first glance.

What is important to know about cryptocurrency addresses

When you first see a cryptocurrency address, it looks like a random string of letters and numbers, such as 1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa. In reality, it is similar to a bank account number, but with a number of features:

Money can be sent to the address without the owner’s permission, no one can prohibit incoming transfers:

• everything is transparent — anyone can view the transaction history of this address;
• addresses can be created instantly and in unlimited quantities;
• addresses do not directly reveal who their owner is;
• all transfers are permanently recorded in the blockchain and cannot be deleted;
• transactions work worldwide, without the need for banks or intermediaries.

For investigators, these features mean both new opportunities and difficulties. On the one hand, everything is transparent, which provides a complete history of fund movements. On the other hand, due to anonymity and the ease of creating new addresses, criminals can quickly cover their tracks.

In this text, we will use the words “address” and “wallet” interchangeably. Technically, a wallet is a program that can manage multiple addresses at once, but in investigations, these terms are often confused.

Two approaches to investigation

Any investigation in the world of cryptocurrencies can be divided into two types. It all depends on what information you start with. Choosing the right method saves time and increases the chances of getting results.

1. Approach through connections and surroundings

If the investigator has an address but no details, for example, it was found in correspondence or in the suspect’s phone, this is called a connection investigation. The goal is to understand what other addresses this wallet is “friends” with and how it is used.

First, they look at the first transaction. Who sent money to this address? If it is a large exchange, then the owner most likely withdrew money from their account to store it separately.

If the first transaction came from another wallet to which the entire balance was previously sent, then it is possible that the owner transferred the funds themselves. It’s like moving money from one pocket to another. It looks like a transfer to other people, but in fact, everything remains with one person. Criminals often use such techniques to make tracking more difficult.

Next, they examine the wallet’s “lifestyle.” Does it receive many small payments and then make one large transfer? This may indicate that someone is collecting payments for services or goods. For example, dozens of transfers of $50–200, followed by one transfer of $8000, is a possible sign of illegal substance trafficking.

It is also important to look at regularity. If a wallet sends money to the same addresses once a week, this looks like regular payments or business connections. They also pay attention to the amounts. People like round numbers — transfers of exactly $500 or $1000 often indicate deliberate actions.

The speed at which money moves is also important. Funds can sit for weeks, or they can be gone in a couple of hours. Fast movement is similar to money laundering, while long accumulations are similar to preparing for a large purchase.

The key point is to understand where the money is being cashed out. Ultimately, criminals need regular money, so they bring cryptocurrency into the real world: through exchanges, ATMs, and exchange services. It is these points that give investigators a chance to track down the criminal.

2. Approach through tracking over time

There is another situation: you need to track a specific transfer that has already been identified as suspicious. Let’s say it is known that on June 15, a criminal group received $25 000 in cryptocurrency. In this case, it does not matter what the wallet was used for before. It is important to track this particular transfer.

The task is to follow the chain of transactions: where did the money go, with whom did it mix, how was it divided into parts. If, for example, $25 000 was combined with $30 000 of other funds, and an hour later a transfer of $55 000 was made, the investigator continues to track the entire amount.

The goal is simple: to follow the money until there is an opportunity to take action: go to an exchange service, record the purchase of goods, find a connection with another suspect. This method turns a single transfer into a whole picture of financial activity.

Five useful techniques

Regardless of the approach, there are universal techniques that help find clues:

• Identify direct counterparties. Find out who the wallet works with directly: exchanges, services, and other users. These are the first places where you can request data.
• Analyze patterns. Systematic small payments and rare large withdrawals are similar to how a store operates. Overly complex schemes with dozens of unnecessary transfers often indicate an attempt to cover tracks.
• Look at fee payments. Transfers always incur a fee in the network’s main currency. Whoever pays this fee usually controls the wallet.
• Pay attention to transfers between different blockchains. Criminals are increasingly transferring money between different cryptocurrencies and networks, thinking that this will cover their tracks. But such transfers can still be traced.
• Build a timeline. For a court or prosecutor, it is important to see not the technical details, but the history of events: where the money came from, how it moved, and where it ended up.

Permanent records as an advantage

Unlike banking systems, where data may be incomplete or hidden, blockchain stores all transactions permanently and with accurate timestamps. Therefore, with the right approach, investigations using cryptocurrencies can be even more convincing.

Where to start

Many people think that working with cryptocurrencies requires in-depth technical knowledge. In fact, the most important things are patience, attention to detail, and the ability to see patterns.

When cryptocurrency data becomes part of the overall picture of an investigation, it helps to link economic crimes, cyberattacks, and international networks. For example, organized groups financed through cryptocurrency can be viewed not in isolation, but as part of larger schemes. This makes it possible to build a complete understanding of their financial infrastructure.