GM Anon!

We have a great issue in store for you today. We’re going to take you through two of the best platforms on the market for tracking smart money movements: Nansen and ChainEDGE

Today we’re going to:

• Provide you with a mental framework on why analytics tools are worth exploring

• How to get started with Nansen and ChainEDGE

• Take you through an example of a workflow using these tools

Now let’s first clear up why this is important.

People new to crypto will buy and hold a coin they either saw on the news, or maybe buy the big two or three such as BTC, ETH, and SOL and wait for these to appreciate over time, and it's not a bad strategy… most importantly, it's safe, well, as safe as one can get being involved in crypto. 

If we’re just focused on gains from price action, these coins will go up and will give you returns you’d struggle to find in other asset classes.

There’s absolutely nothing wrong with buying and HODLing these coins over a few years and ignoring all the ups and downs and then selling in a few years or even a decade.

But… you want more. 

You want to maximize your capital and gains.

You’re here for a good time and maybe a long time… but a good time for sure.

So look at yourself in the mirror and ask yourself what is your risk profile?

Staring back at you, you see a degen staring back from the abyss. 👀

Welcome to the family anon, you’re in good company.

You aim to unleash the potential of comprehensive analytics to elevate your trading approach and execute decisions guided by well-informed quantitative data. 

You aspire to invest in memecoins, DeFi, NFTs and more, but you prefer to invest in the ones favored by major players. You might be a degen, but you're a sophisticated one, discerning rather than blindly following trends.

You can make money in multiple ways through the market: You can trade NFTs, rotate through narratives, get into the nitty-gritty of DeFi protocols.

Now this is where analytics tools can enhance your processes, irrespective of your chosen sector. 

Analytics tools add invaluable insight into how traders with very deep pockets are allocating their capital.

Let’s dive in, anon!

Getting Started👇

A lot of cool stuff is free in crypto, but there are times you have to open the wallet and splurge a bit if you want to up your game. If you’re keen to take your game to the next level, it’s unlikely you’ll find a complete workaround to this. 

So you’ll need to get subscriptions from Nansen and ChainEDGE priced at different options depending on the tier you select. 

Secondly, the best place to start learning these platforms in-depth is to grind through the educational materials available for them.

Check out the Office Hours series by Nansen, and On-Chain Wizard’s walk-through videos for ChainEDGE. 

Next, let’s take a look at what smart money is. You have an idea, but we need to clear it up a bit more so you know how these platforms categorize the wallets they’re analyzing. 

What’s Smart Money?

Nansen has done a great job of providing us with a definition.

Smart Money in the crypto sphere can be classified into two main segments:

1. Institutional Giants, Funds, and Influential Whales: These entities wield extensive market expertise and privileged access to insider information, akin to their counterparts in traditional financial markets. Monitoring their activities can provide unparalleled insights for traders, enabling them to predict market shifts, spot potential catalysts, and unearth promising tokens for further scrutiny.

2. Top Performers Engaged in On-Chain Activities: The plethora of on-chain activities, ranging from basic trades to intricate strategies like yield farming and liquidity provision, has given rise to a fresh category of Smart Money. By analyzing on-chain data in real time, it becomes feasible to identify standout performers across various sectors. This broadens the Smart Money definition to encompass any participant excelling in specific activities, regardless of their stature or size. 

Nansen Versus ChainEDGE: Classification Criteria

Understanding how these platforms categorize smart money is essential for interpreting the data on your screen and grasping its significance.

ChainEDGE: Focuses on the second group outlined in the previous section. It regularly updates the wallets it analyzes, highlighting the most profitable traders in recent months and those consistently making profits. Institutions and major funds may not be featured due to their long-term holds, as their time horizon differs. ChainEDGE primarily showcases daily memecoin activities and traders engaging in quick-profit narratives. Aka, these are the profitable degens in the market.

Nansen: Utilizes a broader classification for smart money, encompassing institutions, funds, profitable traders, and successful NFT traders. Everyone who makes significant moves in the market makes it onto Nansen's list. If you're inclined towards longer-term investments, Nansen might suit your needs. Conversely, if you're aiming for rapid portfolio growth in the short term, ChainEDGE could be the precise tool you require.

Strategies & Risks ♟️

Understanding the risks associated with on-chain analysis is crucial; blind copy-trading should be avoided at all costs. Instead, strive to comprehend the rationale behind a fund or trader's position. What insights are they leveraging, and what is their anticipated time horizon? Why did they choose a particular coin over others within a specific narrative or sector of the market?

If you choose to embark on this journey, we highly recommend tracking the positions of wallets and funds that pique your interest over the span of weeks and months, and consider paper trading. This approach allows you to familiarize yourself with successful traders, wallets, and funds that are attuned to market dynamics.

Once you've familiarized yourself with these platforms and absorbed their educational materials, there's no shortcut. You'll need to dedicate significant time and effort to a thorough analysis. Through this process, you'll gradually develop an intuitive understanding of the market and its participants. 

Unfortunately, no tutorial or video series can substitute for this hands-on experience and deep dive into analysis.

More on the risks…

Exploring the strategies of these dynamic on-chain participants reveals valuable insights, unveiling potential opportunities. However, while these classifications offer a glimpse into the realm of significant market players, they may not paint the full picture of the Smart Money landscape. 

Institutional entities, despite their prominence, might not always lead in performance, and their focus on large-scale operations could limit their engagement in emerging or specialized markets. Moreover, concentrating solely on on-chain data may overshadow the considerable transaction volumes occurring through centralized exchanges.

Smart Money should serve as an additional data point rather than the sole basis for trading decisions.

No market participant is immune to errors, and mistakes are inevitable. Additionally, Smart Money wallets specialize in specific activities. A proficient DEX trader may not necessarily excel in airdrop farming, and vice versa. Hence, it's essential to focus on wallets categorized in areas relevant to your interests.

Lastly, it's essential to recognize the fallibility of human beings. The organizations you're monitoring are not infallible and may not always emerge victorious. For instance, consider Caroline Ellison's infamous interview concerning the management of Alameda's billion-dollar trading fund, despite her background with a Bachelor's in Mathematics from Stanford.

If you prefer your alpha via Telegram 👇

Diving Deeper With Nansen & ChainEDGE🔍

Alright, now that you're understanding the ins and outs of Nansen and ChainEDGE, let's apply them practically and explore some fascinating coins. This will give you a glimpse into useful workflows and the practical functionalities of these platforms.

Gauging Market Sentiment 👀

Nansen also has several smart-money tools that help you judge market sentiment. The following chart shows what percentage of their holdings smart money addresses are kept in stablecoins.

In analyzing market trends, one particularly telling indicator has been the movement of "smart money" investors in the cryptocurrency space. Since the peak in stablecoin holdings during the 2023 bear market, there has been a noticeable shift in the behavior of these investors. Data from on-chain activities reveal that smart money is increasingly moving out of stablecoins and diving back into the broader market, signaling a shift from a risk-averse to a risk-on stance.

This trend is significant as it suggests that these experienced and often larger-scale investors are positioning themselves to capitalize on anticipated market gains and possibly indicating a broader market recovery or bullish sentiment.

The transition from stablecoins—typically used as a hedge against volatility—to more volatile assets underscores a strategic realignment and confidence in the crypto market's potential. 

This behavior is a crucial indicator of market sentiment, often preceding broader market movements and providing insight into future trends.

However, where is all this money going? What sectors are these addresses investing in? Let’s take a look.

As per Nansen, the following sectors have had >$1M inflows over the last 7 days:

• DeFi Asset Management

• DeFi Lending

• Media, Entertainment, and Advertising

• Scaling and Connectivity

• Memecoins

Funds Leaderboard 💹

Nansen also shows you the crypto funds currently holding the most crypto. Jump Trading leads the pack, while Paradigm, Multicoin, Polygon Foundation, and Longling Capital finish in the top five.

What Coins Are These Smart Money Addresses Trading?

Here is a snapshot of the coins smart money addresses traded over the last 7 days. We have excluded ETH variations and stablecoins. wsETH, GNUS, and rsETH are the top 3. 

Let’s hunt for some mid-cap gems (NFA).

As you can see, wTAO, GROK, FLIP, ELON, PORK, LOOKS, ICHI, and DMT are some of the mid-cap tokens these addresses have been trading. 

Major Token Holdings

This chart shows the top token holdings over the last 30 days. Notice the tokens that have had >$10M in balance inflows. Let’s take a look at the top three: FDUSD, ARKM, and wstETH.

FDUSD is a stablecoin promoted by Binance. Since April 17, 2024, trading pairs involving FDUSD on Binance have been offered with zero fees exclusively for premium users (VIP2 tier and above). Before this change, fee-less trading with FDUSD was available to all users on the platform. 

As such, the coin has attracted tremendous interest and volume. Unsurprisingly, traders maintain large holdings of FDUSD when conducting trades.

ARKM is a bit surprising, though if you check their charts, you can see that ARKM has been on an upward swing over the past 30 days. This could be a simple matter of traders cashing in on a bullish token, or it could be degens looking to check out the Arkham Intelligence platform for further insights.

Finally, we have wstETH, which is the wrapped version of the stETH token. "stETH" is the LSD token derived from Lido Finance after staking ETH. Wrapping stETH to create wstETH allows users to utilize this token in various DeFi instruments. Consequently, DeFi enthusiasts commonly use this token to stack yields.

Degen Token Holdings

Let’s look at what the degens are holding. The following chart is from ChainEdge.

The list here shows the top token holdings for Smart Money addresses. As you can see, PEPE is a major holding, with 7 addresses holding >$20 million worth of PEPE. In fact, three out of the top 5 holdings are memecoins (PEPE, BANANA, TRUMP). We also have two Base memecoins in the top 10 - TOSHI and KEYCAT.

Smart Money Trading Volume 🔵

According to DefiLlama, Ethereum and Solana have both dominated on-chain trading volume.

Speaking of Solana, what coins are the degens trading this time around? Let’s take a look.

It's no surprise to see a bunch of memecoins. $michi and $WIF are ruling the roost with a combined $20 million in balance. While WIF has more holders, michi beats it when it comes to the overall balance held.

Also, another interesting observation. Did you notice that the balance held in the top 5 coins in Solana is more than the balance held in Ethereum? Remember the chart we shared earlier?

Solana degens are definitely playing hard!

Restaking Narratives Remain Strong

The following chart shows the coins that are currently getting a large number of capital inflows from Smart Money addresses.

Just look at the tokens currently attracting the most capital inflows. weETH (EtherFi), ezETH (Renzo), two of the top three, are restaking tokens. In fact, among the top 10, we already have eETH (essentially unwrapped weETH) and rsETH (Kelp DAO's restaked ETH). So, degens are definitely going all-in on restaking narratives.

Apart from restaking, the following coins also look strong:

• Ethena (USDe) has remained popular and received extensive coverage. It seems that Smart Money addresses are still very interested in Ethena.

• Pepe keeps on being very popular with the degens.

• Toncoin rounds off the top 10. If you remember, we talked about TON and its potential in Monday’s newsletter. It is definitely a promising coin, and Smart Money seems to agree with us.

Conclusion

By analyzing the holdings of smart money, we can see that they’re strongly interested in memes on Ethereum and Solana, with Base trailing behind. The era of serious projects with actual utility is not currently here. One day?

Perhaps we’ll see, but for now, the memecoin mania continues, and overall, we can see that these participants have been returning to the market and shifting to “risk on” for months.

This should give you a solid overview of Smart Money tools. We recommend you start playing around with them and start making your own trade decisions. If used properly, these tools can help unearth gems.

We’ll return again with more on-chain analysis!

That's a wrap for today, anon!

We trust you found this issue enlightening and that it ignites your journey with on-chain analytics. These are formidable tools that significantly enhance your trading arsenal.

Before we part ways today, why not join our Telegram community? Engage with our researchers who are ready to address your queries, and connect with like-minded enthusiasts! 👇