How to Discover and Track Smart Money in Cryptocurrency

In the previous article, we mainly shared how to quickly analyze a project in 10 minutes. Then, some friends left comments asking if there are other shortcuts to buy profitable projects without having to analyze them themselves.

In fact, any market will have various shortcuts, some of which are accessible to ordinary people, while others are not.

In this article, we will share another shortcut: following smart wallet addresses for copy trading. However, I must say this upfront: if you are hoping to make money while also being mentally prepared for potential losses, then attempting to trade using such shortcuts is not out of the question.

So, what is smart money?

In simple terms, smart money in cryptocurrency mainly refers to those market participants who perform best in terms of returns.

Currently, in my personal understanding, smart wallets can be roughly divided into two categories:

One category is whale wallets, which include various institutions, funds, and influential individuals' wallet addresses.

The other category is ordinary wallets with a relatively high trading success rate. This range is broader, including wallets that perform well in trading, yield farming, staking, and airdrops.

There are also some analytical tools for Smart Money, such as the well-known Nansen, which provides corresponding query and tracking functions. As shown in the figure below.

However, similar functions in Nansen require a paid subscription. Are there any free tools available for assistance?

Certainly. For example, you can use tools like Dune to search for whale wallets and see what they have been doing (buying/selling) recently. As shown in the figure below.

Then, you can use tools like Debank or Arkham, which have been introduced in previous articles, to check the historical trading records and holdings of specific wallet addresses. As shown in the figure below.

However, whales are now aware that their wallets are being tracked by many people, so many whales will also use smaller wallets to trade to avoid tracking. Therefore, directly tracking wallets with a higher trading success rate may be more effective.

Step 1: Find Smart Wallets

So, how can we discover wallet addresses with a higher trading success rate?

Here, we can continue to use the DEXTools tool mentioned in previous articles. Taking the search for smart money on the Solana chain as an example, after entering DEXTools, select the Solana category and sort by Gainers. As shown in the figure below.

Enter any coin page, then find the Trade History section, click the Date button to sort by date, and you will see a list of all wallet addresses that traded this token earliest. As shown in the figure below.

Generally speaking, for a token that has increased significantly, if these wallets can discover and buy this token at the first opportunity, there are mainly two possibilities: one is insiders (such as project parties or informed insiders), and the other is smart individuals who can actively discover new opportunities.

We can continue to check the PNL (Profit and Loss) of some related wallets from the earliest trading wallet addresses through the button in the Others section on the right (the number on the button indicates the number of trades that wallet has made for that token), as shown in the figure below.

Then, find those wallet addresses with relatively high PNL, and click the Maker button to copy that wallet's address; this may be the smart wallet we are looking for.

In addition to the DEXTools tool, you can also consider using the Dex Screener tool mentioned in the previous article, which has similar functions to DEXTools, but its coin page has a separate Top Traders section that lists different wallet addresses by PNL, allowing you to select directly from there. As shown in the figure below.

Step 2: Analyze Smart Wallets

Through the first step, we have found potential wallet addresses. Next, we need to conduct a simple analysis of these addresses.

Although using on-chain explorers (like solscan) can provide detailed data, the user experience is not very good for most people. Therefore, we can use wallet analysis tools like Solsniffer and coinstats for this purpose.

First, check the historical trading success rate of the wallet using Solsniffer. If you find that the overall success rate of the wallet is ≥ 65% and PNL > $300,000 (this can be adjusted based on personal risk preferences), then congratulations, you may have found a smart wallet worth tracking. As shown in the figure below.

Of course, the above process may be slightly cumbersome due to the PNL condition set, but this exploratory process can also be quite interesting.

Next, use coinstats to see what tokens the wallet still holds and the buying prices of each token. As shown in the figure below.

At this point, you should have some smart wallet addresses and have discovered some tokens they hold. So, should you directly copy trade and buy some of these tokens?

Not so fast; let's continue.

Step 3: Track Wallet Transactions

There are mainly two approaches to tracking wallets:

The first approach is to directly copy trade and buy the tokens currently held by the corresponding wallet.

For example, after the above two steps, you already have a list of alternative tokens. Before considering copy trading, you can perform two basic checks.

First is a safety check. To avoid falling into potential traps, it is necessary to conduct a security check on the token contract before considering copy trading. The tool we can use for this is rugcheck, which is specifically designed to check the security of Solana token contracts.

The specific usage of this tool is also straightforward; simply input the corresponding token's contract address (CA) to search. If the result shows Danger, then you need to be extra cautious. As shown in the figure below.

Next is a check on social trends. If a project has a good and active community, it can be seen as having a promotional advantage from a certain perspective. The tool we can use for this is TwitterScore, which automatically generates scores for Twitter accounts based on follower counts and can categorize and rank various project Twitter accounts, showing whether funds (VC) are paying attention to the project. As shown in the figure below.

If you find that the data for both the safety check and social trend check is good, then you can consider making a small investment (it is recommended that for such high-risk trades, the investment should not exceed 1% of your total position) to try buying.

The second approach is to directly track the subsequent transactions of the corresponding wallet and perform automatic sniper copy trading.

This operation generally relies on trading bots (Telegram Bots). Currently, many bots can monitor the latest transactions of specified wallets in real-time and automatically execute sniper buy operations.

There are various bots available; below is a list of some commonly used ones. As shown in the figure below.

Note that different bots support different chains, so choose according to personal preference. Additionally, each bot's official website usually provides detailed operational instructions. Interested friends can visit the corresponding official website or search on Google for more information. We will not elaborate further here.

Finally, let's take a look at some recent information worth noting:

On June 30, Ethereum experienced the lowest average Gas prices since November 2016 last week, with 9 out of the 10 cheapest time slots occurring last week. As shown in the figure below.

Since the Dencun (Cancun) upgrade in mid-March this year, which brought blobs to Ethereum and reduced transaction costs on L2 networks, the median Gas fee has steadily declined. However, on the other hand, it also indicates that the recent activity in the ecosystem has decreased.

Although the lower Gas fees have led to Ethereum's burn rate dropping to its lowest point in 12 months, with a recent 7-day SUPPLY GROWTH of 0.62%/year (indicating slight inflation), if we look at the longer term, ETH will still be deflationary.

On the other hand, due to the ongoing expectations for Ethereum spot ETFs, bullish sentiment for ETH in September seems to be relatively high among some investors, as seen in the call option (C) data. As shown in the figure below.

On June 29, Bitcoin miners' revenue per TH/s (7-day MA) continued to hit new lows, breaking the upward trend that began in June. As shown in the figure below.

Since October 2023, the BTC balance in Bitcoin miners' wallets has decreased by 30,000 coins, currently totaling about 1.8 million coins. The main reasons for this may be: first, the increase in operational costs for mining companies after the Bitcoin halving, necessitating the sale of Bitcoin to obtain operating funds; second, smaller mining companies may find it difficult to continue and have to choose to sell Bitcoin to realize profits.

On the other hand, according to media reports, the number of cryptocurrency ATMs installed globally has surged by 17.8% in the past 12 months, reaching 38,279 units. In just this year (January to June), the number of newly added ATMs has reached 2,564 units. Among them, 82% of cryptocurrency ATMs are located in the United States, with Canada coming in second at 7.7%. Hong Kong has 169 ATMs. Currently, among the 193 countries recognized by the United Nations, 72 countries have cryptocurrency ATMs. As shown in the figure below.

In summary, after reaching a phase (bubble) peak in April this year, market sentiment is undergoing a positive reset. Pessimists always see the current disappointments, while optimists find new hope in the cyclical patterns.

This concludes our content for this issue, which is also the 478th article updated by Huali Huawai. For data references and image sources mentioned in the main text, please refer to the corresponding date articles on Huali Huawai's Notion.

Disclaimer: The above content is merely personal opinions and analyses, intended for learning records and communication purposes only, and does not constitute any investment advice. The cryptocurrency field is a high-risk market; in addition to various forms of scams and Ponzi schemes, many projects also carry the risk of going to zero at any time. Please view it rationally, enhance risk awareness, and avoid engaging in what you do not understand.