In part 1 of our Smart Money series, we showed you how many stablecoins those with the most knowledge in crypto held in their portfolios - showcasing their sentiment.
In part 2, we are going to dive into exactly how smart money is profiting from the Ethereum ecosystem.
To do this, we will be considering changes in Smart Money token holdings using data from Nansen.ai.
This considers all smart money wallet addresses to find the largest positive increases in token holdings.
We can then dive deeper to find the reasons behind the token flows to reveal profit making opportunities.
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Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
What is the Smart Money Doing?
Smart Money Token Inflows
Nansen.ai - 10/11/2021: Change in Token Holdings in Smart Money Portfolios
To find this on Nansen, navigate to the Smart Money section and go to the Token Holdings tab.
(1) Smart Money Stablecoin Exposure Rising
Tether and Binance USD holdings have increased by over $100m in the last day
This is reflected by a short term spike in the amount of stablecoins owned by smart money as a % of their total portfolio
This may indicate that they have used the recent upwards price movement as an opportunity to reduce risk and take profits
(2) Ethereum Name Service (ENS) Airdrop
Smart Money has seen a large increase in ENS token holdings
ENS is a service that allows you to purchase ‘domain names’ that can replace a standard wallet address (for example marketmeditations.eth)
Yesterday the ENS token launched, and allowed anyone that has ever owned an ENS name to claim ENS tokens (if this includes you check our their guide for more details)
If you want to make sure you don’t miss more airdrops check out DeFi Llama’s Airdrop List
(3) Liquity: Justin Sun and Three Arrows Capital
Liquity is a 0% interest, Eth borrowing platform.
Recently, Justin Sun transferred $21m worth of LQTY to Three Arrows Capital
The reason for this transaction is unclear and it doesn’t necessarily mean that 3AC have purchased these tokens. However it has certainly caught our attention and we will continue to keep an eye on the protocol.
Tracking changes in token holdings across the smart money segment can reveal a large number of profit making opportunities. It allows us to find the exact tokens which smart money is buying or selling and highlights the rest of their decentralised activity.
What’s more is that as adoption of alternate layer 1s increases, so does Nansen’s support.
Currently Ethereum, Polygon, Binance Smart Chain and Fantom can all be explored.
However, recently, Nansen officially announced that they will be integrating with Solana in the near future. Given how few analytics platforms are currently available for Solana, this will provide a huge advantage over the rest of the market.
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🥕 Root Cause
Bitcoin has shown remarkable strength this past few days, as it surged to a new ATH and restored faith in Plan B’s plan A.
The question on our lips now though is: what next?
Before apeing in with a giga-long, consider a few angles:
Taproot – the first update to Bitcoin’s protocol in four years takes place in the next few days, after achieving a 90% consensus from the miners. Taproot is a soft fork, which will improve the network’s privacy, efficiency and smart contracts capability.
Spot ETF – after the successful launch of a Bitcoin futures Exchange Traded Fund (ETF), rumours are abound that a spot ETF is on the near horizon too. Barry Silbert, CEO of Grayscale, hinted at a “big week” with this tweet on Monday. With his relationship with the SEC, what does he know that we don’t?
Fear & Greed – the index for fear and greed peaked at 84 yesterday, before returning to 75 today. Yesterday’s mini-correction seems to be making traders more wary about a heavier pullback.
Leverage – the open interest of Bitcoin futures is hovering close to the point it reached in early May before the crash. Funding rates are all positive with some, like Binance and OKEx approaching 10%.
So the bull market for Bitcoin is still in process and there are some indicators that things could get better on a macro level.
However, short-term volatility remains a concern, especially for over-leveraged traders, as the smart money will look to flush out the leverage building up on the newbie exchanges.
🍦Ice Cream Sundaes
After introducing smart contracts in early September, ADA’s price has been trending down. In the meantime, we have witnessed other layer one protocols take turns pumping and making new all-time highs.
Will ADA be next in line?
Many speculated that the stall in ADA price was due to the ecosystem’s lack of an operational decentralized exchange.
On November 8th, SundaeSwap Labs tweeted they had finally made a breakthrough and confirmed the first transaction with the Yoroi dAPP connector.
SundaeSwap claims to be more efficient than Uniswap with 120 swaps per minute but of course, the most noticeable difference will be the lack of gas fees on Cardano.
Cardano is built on Haskell, a very secure programming language but not a very common programming language. This could prove difficult when trying to bring protocols to the ecosystem but Cardano has one of the largest and most dedicated communities in the crypto world. It is this difficult architecture that has delayed the SundaeSwap launch and why they are so excited about their breakthrough in functionality.
Time will tell if Hoskin’s approach to peer-review and academic research will be Cardano’s greatest trait or if it gave other protocols too much of a head start; after all ADA has increased 2000% in the last 12 months.
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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