Identifying Hot Tokens – Part 2
Market Meditations | February 16, 2022
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.ai: 16/02/2022 – 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.ai: 16/02/2022 – 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
- 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.
- 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.
- 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.