Original author: post-goa

Original translation: TechFlow

Based on my research, here is a brief summary of the roles that play the on-chain liquidity game.

Developers and Insiders

False utility slowly pulls up or is “exploited”:

  • These were very popular in the early AI craze because no one really understood AI at the time, but everyone wanted early access.

  • They never complete more than 1% of their roadmap and are usually hyped up by opinion leaders (KOLs).

  • The team often allocates a large amount of supply to themselves when the contract is launched, and then distributes it before anyone else. These tokens are then hidden in multiple wallets and then sold.

  • Slow pull-ups after an initial rally or after weeks of pull-ups before experiencing a hole, and quickly running away after accumulating a large market cap (20-100 million).

  • Involving groups that repeatedly release fake projects that follow the current popular narrative. These projects are often spin-offs of more successful large venture-backed projects.

Programmatic Sniper

Custom Robots:

  • A custom bot that systematically targets multiple ETH projects.

  • The bot follows specific parameters based on the smart contract and transaction volume.

  • The goal is to achieve 10-100x returns on a few projects from many that fail or run away, almost like a form of income.

Manual Sniper (ETH)

One of the most profitable on-chain traders:

  • Search and discover new contract addresses, or obtain contract addresses through internal messages.

  • Simulate contracts to check their security and other indicators of potential, or to understand the background of the team.

  • Outbid other snipers when promising contracts launch.

  • Grab large supply of promising on-chain or stealth projects when they launch without anti-sniping defenses or using pre-launch platforms like Fjord.

  • Use multiple wallets to snipe to hold a large amount of supply, over 1%.

  • In many cases, projects are subject to snipers who can smash the project to zero at an early stage.

  • Many snipers enter the project and play against each other, hoping that "dumb money" will come in and sell when the market cap reaches 500k-1m, and then the project dies. This happens every day on the ETH mainnet.

  • Combining some basic analysis and machine learning to determine which contracts are likely to be profitable with over $5M market cap or more, startup Snipers have significantly outperformed others over the past year.

  • Most snipers hold their coins for less than a few hours.

On-chain data traders

Tracking the actions of snipers and insiders:

  • Tracks the movements of profitable (highest PNL) wallets.

  • Track volume and holder alerts.

  • Often buy strong projects after snipers sell off; or, even if they know snipers are holding a large supply, they will buy if the launch is very promising.

  • Some basic or narrative analysis is usually performed on newly launched projects.

  • Long term holder.

  • As on-chain transactions become a growing segment of the space and more on-chain services become available for retail use, their popularity has diluted and increased.

  • It is the exit liquidity for the above participants.

  • These traders often bet against each other on newly launched projects that will eventually go to zero. It's just a matter of who gets in first.

  • Relying on dumb crypto-twitter (CT), opinion leaders (KOLs) or other later on-chain traders as exit liquidity.

Other traders

Haven’t learned how to use Etherscan or check basic metrics for a token:

  • Get information from call groups, opinion leaders (KOLs), and Crypto Twitter (CT).

  • Slower traders, tend to buy the hype.

  • Believe that cryptocurrencies have utility beyond speculation.

  • One step behind in narrative.

  • Probably only been in the field for less than a year.

  • These traders have most likely given up on buying new utility projects or meme coins. Or they are slowly starting to learn about on-chain transactions and gradually upgrading to the above categories.

Summarize

On-chain trading is a liquidity game for developers, snipers, on-chain data traders, and others. As liquidity entering the on-chain space decreases, competition between participants becomes more intense, with the result that those at the top of the pyramid reap most of the rewards.