How to Track Smart Money in Cryptocurrency? The First Step Towards Financial Freedom

07/18/2023·1years ago

Smart Money has always been a focus in the cryptocurrency market. Building a strategy to track Smart Money can indeed provide substantial returns for ordinary cryptocurrency investors. In fact, the proportion of investors using cryptocurrency trading indicators, strategies, and tools based on Smart Money is gradually increasing. Next, veDAO will lead everyone to understand Smart Money in the cryptocurrency market and how to track them?

I. What is Smart Money?

Smart Money refers to professional investment institutions or individual investors in the cryptocurrency market with outstanding research capabilities and information advantages. They have rich trading experience and excellent historical performance, generally with relatively large funds, mature investment concepts, and a more comprehensive understanding of the cryptocurrency market than ordinary investors. The dynamics of Smart Money have special significance for ordinary cryptocurrency market participants.

II. Why Track Smart Money?

Due to the high volatility of cryptocurrency assets and the severe information asymmetry in the market, coupled with the increasing number of cryptocurrency assets and the strengthening of the Matthew effect in the cryptocurrency market, it is becoming more difficult for ordinary investors to obtain market alpha, while a very small number of Smart Money are making substantial profits. This is because Smart Money can obtain information and resources that ordinary traders cannot easily access, giving them an advantage in the cryptocurrency market. For ordinary cryptocurrency investors, tracking Smart Money can help identify market trends earlier, discover more and better investment opportunities in a timely manner, and thus achieve similar returns to Smart Money or narrow the gap with their returns.

III. How to Track Smart Money?

In the cryptocurrency market, due to the public and transparent nature of the blockchain, users can view every transaction on the blockchain. Through data processing and filtering, theoretically and practically, the transactions made by Smart Money can be identified.

To track Smart Money, investors first need to discover and find Smart Money. This requires investors to use blockchain browsers or third-party tools related to Smart Money, combined with their own goals and needs, to filter Smart Money that suits them. The filtering of Smart Money is mainly based on its past on-chain interactions, transactions, and other on-chain information, and is selected based on its behavior patterns such as transaction or interaction types, quantified historical performance evaluation indicators, fund flows, and interaction protocols. Once Smart Money is found, the next step is to track them. For ordinary cryptocurrency market investors, tracking Smart Money can rely on their trades or fully replicate their investment portfolios, thereby directly benefiting from their insights and skills, and thus achieving more efficient gains in the market and obtaining cryptocurrency market alpha.

However, it is important to note that not all Smart Money are as smart as they appear on the surface. Blindly replicating all their trades without in-depth research is usually not wise, as these traders often enter the market at lower prices, while later traders are in different market conditions. Additionally, some Smart Money have multiple accounts, and the behavior of a single account does not necessarily represent the true behavior of Smart Money. It is currently difficult to determine how many accounts a Smart Money has. A better approach is to use tracking Smart Money strategies as an important reference dimension, combined with other indicators and analysis to make investment decisions. Currently, there are many platforms specifically designed to track Smart Money in the cryptocurrency market. Here, veDAO has selected 5 simple yet powerful choices for everyone.

3.1 Nansen

As one of the most well-known blockchain analysis platforms for tracking Smart Money, Nansen provides a simple way to research popular projects, new trends, and important on-chain behaviors. The platform offers various free tools and allows traders to conduct in-depth research on individual projects, smart contracts, and wallets. Its most relevant feature is the "Smart Money" tracker, which allows users to track the on-chain activities of a large number of tagged wallets.

Nansen's Smart Money tracker provides three main pieces of information about the on-chain activities of Smart Money (or addresses):

DEX Trades: Tracks the trading behavior of Smart Money in top DEX markets
Transfers and Interactions: Tracks all recent transfers of Smart Money and their interactions with contract protocols
Token Holdings: Explores the token holdings of Smart Money and their profit rankings

Importantly, Nansen's Smart Money tracker allows users to filter Smart Money addresses, including specific types such as funds, smart DEX traders, airdrop experts, smart NFT traders, IDO experts, staking experts, etc. This can help users refine their search, including customizing the types of transactions they are interested in.

Nansen's Smart Money tracker is currently only available to paying users and is relatively expensive. However, Nansen does offer a 7-day free trial for $9, which can be used to evaluate its value to users.

3.2 Dune+Debank

Dune Analytics is a user-driven blockchain analysis platform where anyone can create their own dashboards and share them for others to use. The platform provides a large number of community-created dashboards that users can use as part of their trading decisions. Through in-depth research, veDAO has found two of the best dashboards that can help users identify and track Smart Money.

A. Token God Mode Dashboard

This is created by a user named defimochi. This tool allows users to find a large amount of data for specific tokens of interest, helping users find Smart Money that may be trading the token.

https://dune.com/defimochi/token-god-mode

By entering a token address, selecting a tracking time range (e.g., the past 30 days), and choosing the relevant blockchain, the dashboard will present a list of the top 100 estimated profitable trades (and other data). Users can then browse this list and manually filter out MEV bots to find the real Smart Money traders, those who are making the most profit from trades.

Next, users can copy and paste their wallet address into DeBank, where they can learn about their current token holdings and their recent trades. With this information, users can gain some clues about their trading and investment strategies.

https://debank.com/

B. GMX Trader Leaderboard Dashboard

This dashboard is created by a user named adamzjw to identify Smart Money traders based on profit or loss ratio. Users can then input their address into DeBank or other portfolio tracking tools to further analyze their on-chain behavior.

https://dune.com/adamzjw/gmx-trader-leaderboard

3.3 CryptoRank

CryptoRank can be used to detect recent fund trends. Although the platform does not provide real-time on-chain analysis like the above tools, CryptoRank offers a wealth of data to explore new market trends and opportunities. The platform provides various tools and trackers to help users gain a deeper understanding of the market and current fund investment situations.

For example, the Crypto Funds and Investors feature can be used to gain insights into the investment strategies of well-known funds and angel investors. This tool allows users to browse a large number of venture capital funds, angel investors, and independent traders' portfolios to understand their current performance. Users can also see a list of recent projects and recent funding rounds, showing new projects that have recently received funding (and established projects), as well as detailed information about the entities involved.

This can help users understand the market trends perceived by Smart Money, enabling users to make wiser investment decisions.

For a more general view of Smart Money in the cryptocurrency field, CryptoRank also provides various charts highlighting important data, such as monthly fund changes, the most popular investment categories, and the most active funds.

3.4 Arkham

Arkham allows users to find the most profitable traders and is a relatively new on-chain analysis platform. The platform does not automatically provide Smart Money wallet addresses and requires users to search for them. It provides rich information that users can use to find Smart Money through some investigation. Users can easily find a list of active Smart Money traders using its trading filters, and then further filter out the leading traders.

For example, by filtering the results to only include trades made in the last hour, with a minimum value of $50,000, and only trades made by funds, users can see a list of recent large trades made by Smart Money.

Users can then browse this list to find new or established cryptocurrency assets that are popular among Smart Money traders, or find particularly active wallets that may require further investigation. After identifying a potential Smart Money, users can click on their tag or wallet address to access a wealth of additional data, including their recent profit/loss charts.

By comparing the recent profitability of several Smart Money and finding a suitable user to track, users can view their current on-chain holdings, check their investment portfolios, or analyze their trading strategies. The official website of the Arkham project is:

https://www.arkhamintelligence.com/

3.5 Chainalysis

Chainalysis helps users track the behavior of Smart Money by tracking and analyzing on-chain transaction activities. It provides information about market participants and investment strategies. This can help users make wiser investment decisions and better understand market dynamics.

By using its proprietary analysis tools and techniques, Chainalysis can track and analyze on-chain transaction activities. It can identify the trading patterns and behaviors of Smart Money, as well as the relationships between Smart Money and specific projects or entities.

Chainalysis's platform can help users understand the investment strategies and behaviors of Smart Money, as well as their influence in the market. By analyzing the trading and holding activities of Smart Money, users can gain insights into market trends and investment opportunities.

By tracking the movements of Smart Money, Chainalysis can provide detailed information about market participants, including investors, funds, and traders. This information can help users understand market dynamics and make wiser investment decisions. The address of the Chainalysis platform is:

https://www.chainalysis.com/chainalysis-business-data/

In addition to the above 5 tools, veDAO Research Institute has also compiled several other commonly used tools to help everyone easily find Smart Money.

veDAO is a decentralized investment and financing platform led by DAO, committed to discovering the most valuable information in the industry, and dedicated to exploring the underlying logic and cutting-edge tracks of the digital encryption field, allowing every role within the organization to fulfill their responsibilities and receive rewards.

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