What is smart money?
In the field of encryption, smart money refers to professional investment institutions or individual investors with professional knowledge, in-depth understanding of the market, and information advantages. Smart money has always been the focus of attention in the crypto market because these entities usually have access to information and resources that are not easily available to ordinary traders. They have rich trading experience, excellent historical performance, and mature investment concepts, which may make them successful in the crypto market. Dominate the cryptocurrency market where there is severe information asymmetry.
Why follow smart money?
The high volatility of crypto assets and the serious information asymmetry in the market, as well as the increasing number of types of crypto assets, the Matthew effect (the rich get richer and the poor get poorer) in the crypto market are getting stronger and stronger, and ordinary investment It is more difficult for investors to obtain Alpha in the market, while a very small number of smart money are making a lot of money. This is because smart money has access to information and resources that are not readily available to the average trader, giving them an advantage in the cryptocurrency market. For ordinary crypto investors, tracking smart money in the crypto market can identify market trends earlier and discover more and better investment opportunities in a timely manner, thereby obtaining the same returns as smart money or narrowing the gap with smart money returns.
How to track smart money?
In the encryption market, due to the open and transparent nature of the blockchain, users can use a blockchain browser to view every transaction conducted on the blockchain. After processing and filtering the data, from a theoretical and practical point of view, smart money can Transactions made are identifiable.
To track smart money, you first need to discover and search for smart money. This requires investors to use a blockchain browser or smart money-related third-party tools to combine their own goals and needs to screen the smart money that suits them. Screening smart money is mainly based on its past on-chain interactions, transactions and other on-chain information, and selecting based on its transaction or interaction type, quantitative historical performance evaluation indicators, capital flow and interaction protocols and other behavioral patterns; secondly, find smart money , the next step is to track smart money, optionally or completely copy tracking, for ordinary crypto market investors, tracking smart money, you can rely on their transactions or completely copy their portfolio, thereby directly benefiting from their insights and skills, thus Get twice the result with half the effort in trading and gain alpha in the crypto market more efficiently.
But itâs important to note that not all smart money is as smart as they appear. It is usually certainly unwise to blindly copy all their trades without in-depth research, as these traders tend to enter the market at lower prices, while later traders are in different market conditions. At the same time, some smart money has multiple accounts. The behavior of a single account does not represent the true behavior of smart money. It is still difficult to determine how many accounts a smart money has. A better approach is to use smart money tracking strategies as an important reference factor, combined with other indicators and analysis to make investment decisions. Currently, many tool platforms specifically designed to track smart funds have emerged in the crypto market.
Here are several blockchain analysis platforms recommended:
Nansen provides an easy way to study hot projects, new trends, and important on-chain behavior. The platform offers a variety of free tools while allowing traders to delve deeper into individual projects, smart contracts, and wallets. Its most relevant feature is called Smart Money, and as the name suggests, it allows you to track the on-chain behavior of a large number of tagged wallets.
Dune Analytics is a user-driven blockchain analytics platform that allows anyone to create their own dashboards and share them for others to use. The platform offers a number of community-created dashboards that users can leverage as part of their trading decisions. Through in-depth research, veDAO found two of the best dashboards that can help users identify and track smart money.
The concept of Arkham AI has exploded, and arkham has grown several times. It uses AI to allow users to find the most profitable traders. It is a relatively new on-chain analysis platform. The platform does not automatically provide smart money wallet addresses, users need to search for them themselves. The platform provides a wealth of information that users can use to find smart money through some detective work. Users can easily find a list of active smart money traders by using its trade filters, and then further filter down to those who are currently leading the trade.
