Research Summary

The report discusses two strategies for identifying promising cryptocurrency investments using on-chain data. The first strategy involves finding divergences between price and fundamentals, such as when a protocol’s usage increases without a corresponding increase in the price of its token. The second strategy, known as “whale watching,” involves tracking the on-chain activity of historically profitable traders. The report emphasizes the importance of using on-chain data in conjunction with other factors, such as a promising roadmap, decent token utility, and a strong community.

Key Takeaways

Finding Divergences Between Price and Fundamentals

  • Identifying Bullish Divergences: The report highlights the importance of spotting bullish divergences, where a protocol’s usage significantly increases without a corresponding increase in the price of its token. This can be an indicator of an undervalued project.
  • Example of Bullish Divergence: The report uses Thorchain and its token RUNE as an example of a bullish divergence. The protocol saw a massive increase in its cross-chain trading volume in October, which eventually led to a significant increase in the price of the RUNE token.
  • Key Metrics: The report identifies trading volume and revenue as key metrics for decentralized exchanges, while TVL and DEXs volume are important for L1 & L2 blockchains. Other projects should focus on fees and revenue.

Whale Watching

  • Tracking Profitable Traders: The report discusses the strategy of “whale watching,” which involves identifying and tracking the wallets of historically profitable traders based on their on-chain activity.
  • Use of On-Chain Analytics Platforms: The report recommends using free on-chain analytics platforms like Arkham and Debank to find profitable whales and monitor their trading activity.
  • Importance of Research: While whale watching can provide valuable insights, the report warns against blindly copy-trading these traders. Instead, it suggests using this strategy to find tokens that might be worth researching further.

Actionable Insights

  • Utilize On-Chain Data: Investors should consider using on-chain data to identify promising cryptocurrency investments. This can involve looking for divergences between price and fundamentals or tracking the activity of profitable traders.
  • Investigate the Potential of Undervalued Projects: Investors should look for projects where there is a significant increase in usage without a corresponding increase in token price. This could indicate an undervalued project with potential for future growth.
  • Monitor the Activity of Profitable Traders: By tracking the on-chain activity of historically profitable traders, investors can gain insights into potential investment opportunities. However, it’s important to conduct further research rather than blindly following these traders.

Visit the full report here


Related Research