Original Title: "Whale Analysis Report ------ NFT Perspective"

Author: DappRadar

The following content belongs to a series of new reports aimed at analyzing on-chain metrics, with this article focusing on observing whale patterns. It analyzes some of the most important NFT collections and intends to derive some behavioral patterns from their whale wallets.

Note: Cryptocurrency whales is a term that refers to individuals or entities holding large amounts of cryptocurrency. Whale activity is a simple signal that can have a significant impact on cryptocurrency prices based on the scale, quantity, source, and purpose of transactions.

The blockchain industry is constantly evolving. Last summer, we saw the DeFi craze affecting thousands of users, with billions of TVL locked in various protocol dapps. This year, we have witnessed the rise of NFTs in different contexts and protocols, generating values that were unimaginable just a few months ago.

Due to the increasing importance of NFTs in the industry, we decided to delve into one of the most important on-chain metrics in this field, namely the whale concentration index.

In this report, we aim to analyze and map some existing patterns of whale behavior across six projects: CryptoPunks, Bored Ape Yacht Club (BAYC), Art Blocks, Axie Infinity, Cool Cats NFT, and Pudgy Penguins. First, we briefly discuss what whales are and how they influence the NFT market. Then we look at some tools useful for conducting whale analysis. Subsequently, we introduce the whale concentration index, which is an on-chain metric for assessing project distribution, and finally, we analyze whale behavior in the aforementioned projects.

Source: DappRadar

Table of Contents

Key Findings

Whale Analysis

Tools

Whale Concentration Index

Comparing NFT Collections from a Whale Perspective

Whale Trading Behavior Patterns

Conclusion

Key Findings

Whale analysis is a key on-chain metric for understanding potential market manipulation.

Pudgy Penguins and BAYC are among the best-distributed projects in the NFT space, with whale concentration indices of approximately 6.24% and 6.70%, respectively.

CryptoPunks has a high whale concentration index, with 10 wallets holding 1,410 Punks (14.10%), but due to the massive market cap of the collection ($3.1 billion), it is less susceptible to manipulation.

BAYC has a lower risk of market manipulation due to its lower whale concentration index (6.70%) and a market cap of $1.1 billion.

Art Blocks whales hold significant assets in CryptoPunks and Meebits, with 211 and 414 pieces, respectively; these whales also seem to favor Pudgy Penguins, as Art Blocks whales also own 202 Penguins.

Axie whales primarily focus on gaming NFTs, with only two whales holding a diversified NFT collection.

BAYC whales and Cool Cats whales tend to have diversified NFT strategies; BAYC whales collectively own 418 Art Blocks, while Cool Cats whales hold at least three collections, including 81 CryptoPunks.

CryptoPunks whales are very focused on Larva Labs collections, as these whales own nothing else besides Art Blocks (427), Punks (1,410), and Meebits (1,329).

CryptoPunk whales have the highest average portfolio value ($53.6 million), followed by BAYC and Art Blocks (approximately $11.5 million).

Whale Analysis

When analyzing the blockchain industry, there are many options that can help us better grasp the current state of the industry. Comprehensive technical analysis is key to understanding the cryptocurrency market. However, to gain a thorough understanding of NFTs and DeFi, it is crucial to supplement it with on-chain analysis.

One of the most useful on-chain data points is observing whale behavior. Whales in the blockchain industry can refer to whale transactions or whale wallets. Whale transactions are operations that require a significant amount of monetary value (any amount that could change the overall market sentiment for a given token) and are often used as cryptocurrency indicators. On the other hand, whale wallets refer to addresses that hold the largest share of a particular collection. In this report, we will analyze the top 10 holders of the collections.

Whale transactions (top) vs. CryptoPunks/Meebits whale wallets (bottom); Source: Twitter, DappRadar

Analyzing the distribution of token holders is crucial for understanding whether the supply of a given token is evenly distributed or if most of the supply is held by a few wallets. A high concentration of assets in a small number of wallets poses a risk to any token or dapp. For example, concentration in a few wallets could lead to potential sell-offs, thereby damaging the asset's value. Conversely, diluting more supply across more wallets reduces the risk of sell-off pressure. In this case, the likelihood of different owners agreeing on the exact timing of asset sales under standard conditions is lower.

Another approach that can be applied to blockchain analysis is social trading. In traditional markets, social trading is an investment strategy that allows individuals to mimic the trading behavior of their peers. In cryptocurrency, mimicking whales can yield significant advantages. The same mindset applies to NFTs. It is interesting to observe which collections attract the interest of whales from other collections.

Tools

In public blockchains like Ethereum, successful transaction records can be easily accessed through block explorers. This means that, with the help of certain tools, all data in each mined block can be publicly accessed. For example, Etherscan is used to monitor and analyze transactions occurring on the Ethereum blockchain. Etherscan is very convenient for conducting whale analysis. The tool displays a default option for viewing the distribution of holders for most ERC 20 and ERC 721 tokens.

To add another layer to the current analysis, we used our own DappRadar portfolio tracking tool. This product allows users to identify NFT (and DeFi) holdings associated with specific wallets, thus serving as a benchmark unit to some extent.

Source: DappRadar Portfolio Tracker

The DappRadar portfolio tool allows for viewing across numerous projects. As mentioned earlier, mimicking certain whale investments can be seen as another investment strategy. For example, one of the BAYC whales, dingaling.eth, has a very diversified portfolio. This individual owns at least two pieces in the most recognized Ethereum NFT collections and has a significant presence in Art Blocks and Cool Cats, in addition to BAYC and Bored Ape Kennel Club (BAKC). Furthermore, we can see important assets in metaverses like The Sandbox and Voxo Dexus.

With tools like Etherscan and DappRadar's Portfolio Tracker, enhanced on-chain and benchmark analysis of wallets related to specific scenarios is relatively easy.

Whale Concentration Index

The Whale Concentration Index (WCI) and unique holder ratio are two important metrics related to the overall distribution of NFT projects. These two metrics have a strong negative correlation and are particularly important for assessing limited edition collections.

WCI indicates the number of pieces held by the top 10 wallets in a given collection. On the other hand, the holder ratio measures the reach of an NFT project. It is calculated by dividing the number of unique holders by the project size. A high holder ratio and low WCI indicate that the project is well-distributed and less susceptible to market manipulation, thus more resilient to sell-off pressure.

For example, CryptoPunks is a collection of 10,000 unique pieces. At the time of writing, 2,931 independent Punk owners represent a holder ratio of 29.31%. When analyzing Punk whales, the top ten Punk whale holders collectively own 1,410 pieces, or 14.1% WCI. For mature projects like CryptoPunks, the relevance of issuance diminishes due to their massive market cap (over $3 billion at the time of writing).

In contrast, BAYC is one of the best-distributed projects in the entire NFT space. BAYC currently has a whale concentration of 6.7%; that is, among 10,000 apes, whales only control 670. Considering BAYC's market cap (approximately $1.1 billion), from the perspective of market manipulation, this collection seems to be one of the most stable projects.

In the long run, WCI is an important metric for analyzing NFT collections, especially when the project's market cap is not high. Given the scale of 10,000 pieces and a price of 0.08 ETH, the collection had a market cap of about $2.4 million at issuance, making it more susceptible to significant market fluctuations closely related to whale users.

Comparing NFT Collections from a Whale Perspective

As mentioned earlier, another advantage of analyzing whale wallets is identifying common behaviors and patterns among certain whale users. Using DappRadar's portfolio tracking tool, we analyzed the whale users of NFTs within the tracked scope and reached a conclusion.

By observing Art Blocks whales, we noted their significant interest in Larva Labs' CryptoPunks and Meebits collections. Overall, Art Blocks whales hold 211 CryptoPunks NFTs and 414 Meebits NFTs. On average, the Art Blocks whale portfolio is valued at $11.7 million, making them one of the wealthiest whale groups in the field. Notably, Art Blocks holders also seem to be interested in Pudgy Penguins, with these whales collectively holding 202 Penguins.

Source: DappRadar

CryptoPunks whales are a group with lower diversification. Their wallets do not hold any assets outside of Larva Labs. While this may be considered a risky strategy, it can yield substantial returns if the investments are correct. The average value of CryptoPunk whales is $53.66 million, which shows a significant gap compared to whale users of other collections.

Source: DappRadar

Unlike Larva Labs whales, BAYC whales seem to have a very diversified NFT investment strategy. A clear signal is the low whale concentration index of only 6.7%. In addition to investing in BAYC, Bored Ape whales also hold significant assets in Art Blocks and Meebits. Furthermore, 40% of BAYC whales' collections include at least one CryptoPunk. The average value of BAYC whale portfolios is $11.4 million, making them one of the wealthiest whale groups as well.

Source: DappRadar

Cool Cats is another project that appears to have a similar strategy, albeit to a lesser extent. This NFT collection has quietly established itself in the NFT space, and the distribution metrics show good results. A holder ratio of 0.425 and a WCI of 12.74% indicate that it is a well-distributed project.

Cool Cat whale users are also involved in Art Blocks, holding 252 Art Block NFTs, with 185 from the same wallet. This wallet also contains 79 Punks and 60 Meebits, with the average value of Cool Cat whales reaching $3.15 million. We also found that Cool Cats whales hold NFT assets in other series such as CyberKongz, SupDucks, and Wicked Craniums.

Source: DappRadar

Finally, let's take a look at the Axie Infinity series. Identifying whale users in this series is not an easy task. Axie Infinity currently has over 1 million active players, bringing the total number of Axie players to 3 million. In addition to this number, there are about 240,000 Axies for sale on the Axie market. Nevertheless, we identified significant holders with 27,200 Axies. Due to the "play-to-earn" nature of the Axie Infinity game, its distribution is good, and whale players do not follow a diversification strategy. The estimated value of Axie whales exceeds $1 million.

Whale Trading Behavior Patterns

A deep dive into whale wallets allows users to map certain specific patterns that serve as a starting point for building social trading strategies applied to NFTs. In this section, we analyze trading behavior over the past 30 days. Similar to previous analyses, social trading of whale users is also conducted using the aforementioned tools.

By analyzing BAYC whales, we can hypothesize that they have capitalized on the rising floor prices of the collection, as they recently sold some collectibles. In the past 30 days of August, 23 BAYC NFTs and 18 BAKC NFTs were sold. Although the WCI metric did not change significantly, it somewhat prompted a more optimized distribution status for the BAYC series. Complementing this behavior, we also observed that some BAYC whales continued their diversification strategy. Notably, they acquired 309 PunksComic DAO tokens and a significant number of pieces from other collections such as FLUF, StonerCats, SupDucks, and Cool Cats. One whale even decided to strengthen its position in BAYC by purchasing an additional 101 BAYC NFTs.

Source: Etherscan

In contrast, CryptoPunks whale users have been relatively quiet. These whales did not engage in large-scale selling or acquiring of CryptoPunks or Art Blocks, but sold about 40 Meebits instead. Meanwhile, CryptoPunks whale users also purchased a few pieces of art from different series, particularly NFTs from Art Blocks, Audioglyphs, CyberKongz, and Generative Masks.

Interestingly, the number of Art Blocks whales in the series seems to have increased. The WCI for the series increased by nearly 2%. Art Blocks owners collectively purchased 2,700 pieces of Art Blocks while selling 1,100 pieces.

It is clear that some collectibles are now viewed as safe assets for storage and appreciation, like Art Blocks and CryptoPunks, whose whale users have not reduced their current holdings but rather increased them. As more users enter the field, it is necessary to monitor these collectibles that have recently attracted significant attention from whales, such as PunksComics, CyberKongz VX, and World of Women.

Conclusion

Whale analysis is an on-chain technique used to thoroughly examine the supply distribution of NFT projects. By using appropriate tools (such as Etherscan and DappRadar's portfolio page), one can gain deeper insights into more details. Additionally, understanding applicable metrics, such as the whale concentration index and holder ratio, aids in in-depth background analysis. Investing in NFTs is undoubtedly a challenge, so learning appropriate evaluation tools and techniques may come in handy at some point.

Among the six collections analyzed, there are no issues of market manipulation. Those NFT series that may tend to have more concentrated supply, such as Larva Labs projects, have been identified as major NFT collectibles, thus significantly reducing the risk.

On the other hand, new series like Pudgy Penguins may face higher manipulation risks, even though their whale concentration index indicates that it is a well-distributed project. However, in the future, in terms of demand and concentration alone, collectibles like Pudgy Penguins can serve as benchmarks for the latest NFT projects.

In terms of diversification strategies, we noted that BAYC and Cool Cats whales have diversified investment portfolio strategies, while Larva Labs whales are very focused on their projects. Diversified portfolios include all collections assessed in this report, as well as other newer NFT collections like CyberKongz VX and SupDucks.

Finally, by analyzing the trading behavior of these whales over the past 30 days at the end of August, we can identify certain patterns. First, collectibles like BAYC and Art Blocks, which have seen significant average price increases recently, are being used as a means of profit-taking. While Art Blocks whales prefer to reinvest in their favored collections, BAYC whales seem to seek to increase the chances of discovering potential NFTs by diversifying their holdings.

Moreover, it is encouraging for the entire NFT space that some of these whale players are still on the lookout for the next big project. For example, we see new collectible series like FLUF, CyberKongz, Animetas, and World of Women becoming new focal points for whale players.

Whether through understanding advanced metrics like WCI or through deeper analysis, it is advisable to gather as much knowledge as possible when investing in NFT collections.

Article Link: https://www.8btc.com/article/6690802