🧘‍♂️ALERT: Next Big Crypto?

Market Meditations | February 16, 2022

Dear Meditators

In part 1 of our hot tokens series, we showed how you can track the most profitable crypto investors to find the hottest tokens.

Today we are going to show how anyone can assess a token opportunity using The Sandbox (a trending metaverse project) as an example.

Today’s Meditations:

  • Top Headlines
  • Identifying Hot Tokens Part 2
    • Where we discuss SAND, the next big crypto?
  • The Macro Crypto Picture
  • Stablecoin Regulation

With Nansen’s On-Chain data, you can secure an edge in the crypto and NFT markets:

  • Exciting New Opportunities. See where funds are moving their money.
  • ? Perform Due Diligence. Get more information on projects or tokens.
  • ? Defend Your Positions. Create smart alerts to track over 100 million ETH wallets.
  • ? Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in

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⏰ Top Headlines

? Finding Hot Tokens – Part 2

Step 1: Understanding the Token Distribution

Nansen allows us to see which addresses own the most of any token in real time. This can help us understand if there is a risk from one entity holding a large proportion and if there is any smart money invested in the project.

Nansen.ai16/02/2022 – Token Distribution: The Sandbox (SAND)

  • 4 of the top 5 holders are internal Sandbox wallets and comprise 58% of all tokens.
  • The Sandbox is a reputable project however in a lower cap coin, this could be a concern with one entity having so much control over price action.
  • 2.6% of the token has been deposited to Polygon. Staking on Polygon has recently gone live, and using Nansen it was possible to spot this earlier than the announcement – allowing you to take advantage of the opportunity before the market.

Tip: We can filter by the smart money emoji ? to see the biggest smart money holders of SAND.

Step 2: Measuring Adoption

The number of unique addresses is a good measure for adoption and also the network effects of a project (where the value of a product increases alongside the number of users):

Nansen.ai16/02/2022 – Unique Addresses: SAND

  • The number of unique wallets has risen parabolically since the end of 2021
  • Having 100,000 unique holders shows us that The Sandbox has gained significant adoption and is currently benefiting from network effects

Step 3: Further Considerations Using Token God Mode

  1. Tokens on exchanges: Whilst this indicator has its limitations, a decrease of tokens sat on exchanges is bullish, showing that holders are not looking to sell in the short term.
  2. Balance changes: This can be used to see which wallets have received / sent the largest amount of tokens in a given time frame. We can therefore find smart money activity and new staking mechanics / opportunities for yield.
  3. Your Overall Trading System: Whilst Nansen gives us access to actionable information, we must use this as confluence with our personal trading systems that leverage technical analysis, psychology and risk management.

There are large amounts of profits to be made buying and selling crypto tokens. Whilst being profitable is difficult, it is possible when using the right tools. Nansen gives us real time insights into token fundamentals: showing top holders, current level of adoption and smart money investors.

? Macro De-Risking

People are taking cover. News of a potential conflict in Ukraine coupled with interest rate hikes by the U.S. Federal Reserve has put traders and investors in a protective rather than a speculative mode.

Here are some macro observations:

  • The average Bitcoin leverage ratio is sharply down – futures holders are voluntarily closing their positions rather than being forced to via mass liquidation event.
  • There have been large Bitcoin outflows for the third straight week – high volumes leaving exchanges historically lowers the chance of a big sell off when they are transferred to personal wallets for safe keeping.
  • The total supply held by Long Term Holders has plateaued and is stable, while the number of Short Term Holders in profit has started to increase, suggesting an underlying demand in this price area.
  • ETFs are retaining their trading volume and much of their investor base – this has been interpreted as a sign of strength, “staying power and growth potential”.

Since selling spot on exchanges is no longer the only way to de-risk it is plausible that the uncertainty in the market is being priced in.

Remember though to combine macro and on-chain analysis with technical analysis to build up a more complete picture.

? Unstablecoins? 

Josh Gotthiemer, a Democrat from New Jersey, presented a draft bill to congress yesterday called the Stablecoin Innovation & Protection Act.

  • The draft bill aims to define stablecoins and isolate them from the more volatile cryptocurrencies, as well as put appropriate protections in place for consumers,” according to Gottheimer’s office.
  • The draft bill also includes the recommendation that “the non-bank issuer must maintain at least 100% reserve assets consisting of U.S. Dollars, U.S. government-issued securities such as U.S. Treasuries, and other assets as deemed appropriate by the Office of the Comptroller of the Currency (OCC). The cash collateral must be held in a segregated FDIC-insured account.”

The Senate Banking Committee meeting (held the same day) was a part-two stablecoin focused meeting as well.

Nellie Liang represented the Treasury and the President’s Working Group to sell their idea to congress that a stablecoin issuer must be an insured depository institution (IDI) but in a response to Pat Toomey (R-PN), she insisted there was flexibility and room for a stablecoin issuer to not necessarily be FDIC insured.

Next week we will dive further into token due diligence, showcasing other methods you can use to help your investment process.

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??‍♂️✍️ Stories in this newsletter were written by D. BeverlyIsambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.

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