quantitatives 4PljbcYIzyE unsplashHow crypto whales can change the market
Crypto whales can change the market.
— Pothu (@cryptoPothu) August 17, 2022
Understanding how their trades impact the market can give you an investing edge.
Here’s how whale movements affect the market 🧵
There are several types of transactions that whales can make. The most important are:
— Pothu (@cryptoPothu) August 17, 2022
• sending crypto to an exchange
• sending crypto to a wallet from an exchange
• wallet to wallet transactions
Each of these has different price signals.
1. Sending crypto to an exchange
— Pothu (@cryptoPothu) August 17, 2022
Exchanges are fairly easy to identify on Etherscan. They’re usually labeled. In the picture below 400 ETH is being sent to @kucoincom. pic.twitter.com/OSTA2lu8x8
When you see a cryptocurrency being sent from a regular wallet to an exchange wallet, it usually means that someone is about to sell.
— Pothu (@cryptoPothu) August 17, 2022
If you see hundreds of millions of dollars of a cryptocurrency being sent to an exchange, this could mean huge sales are coming.
2. Sending Crypto to a wallet from an exchange.
— Pothu (@cryptoPothu) August 17, 2022
In the picture below 2000 ETH is being withdrawn from KuCoin. pic.twitter.com/yalpMuXHA9
When whales move crypto off of an exchange they're less likely to sell.
— Pothu (@cryptoPothu) August 17, 2022
They could be taking profits or moving money to cold storage.
Suppose there are enough whale movements off exchanges and into wallets for a specific cryptocurrency.
— Pothu (@cryptoPothu) August 17, 2022
The sudden reduction in market-ready supply can be rocket fuel for positive price action.
3. Wallet to wallet transactions
— Pothu (@cryptoPothu) August 17, 2022
Some whales don’t like exchanges. The large amount of crypto they’re looking to buy or sell could affect prices and stir up the market.
Whales often participate Over the Counter Trading (OTC).
OTC allows big investors to buy or sell large amounts of cryptocurrency directly from an exchange or cryptocustodian at a fixed price.
— Pothu (@cryptoPothu) August 17, 2022
Wallet to wallet transactions are a red herring.
These transactions don’t typically influence the market significantly.
— Pothu (@cryptoPothu) August 17, 2022
It’s impossible to know who’s buying or selling until it’s too late.
Another thing to consider when analyzing a whale movement is Market Depth.
— Pothu (@cryptoPothu) August 17, 2022
What size transactions should we be looking for when we’re looking at whale wallets?
— Pothu (@cryptoPothu) August 17, 2022
This depends on market depth.
Market depth tells you how much money is required to push the price of a cryptocurrency up or down.
The more money it takes to push up or push down the price by 2% the greater the market depth that crypto has.
— Pothu (@cryptoPothu) August 17, 2022
You can easily check a token's market depth under the Markets tab on CoinGecko or CoinMarketCap.
In the picture below you can see the market depth for ETH by exchange.
— Pothu (@cryptoPothu) August 17, 2022
It shows how much ETH needs to be bought or sold on a given exchange to push the price up or down 2%. pic.twitter.com/JGaXjQhFuB
Market depth is significant when considering how a whale movement will affect price.
— Pothu (@cryptoPothu) August 17, 2022
If you see 10 million dollars worth of ETH being transferred to an exchange then the effect on price could be negligible.
An impending risk in the Ethereum NFT market
There are currently 32,267 ETH ($59,048,610) worth of NFTs being used as collateral for loans on BendDAO alone
— Cirrus (@CirrusNFT) August 17, 2022
For the first time ever, a lot of these are at serious peril of liquidation
A thread on the single biggest risk to the NFT market that nobody is talking about
1. WTF is BendDAO?
— Cirrus (@CirrusNFT) August 17, 2022
BendDAO is the first peer-to-pool based NFT liquidity protocol.
Depositors provide ETH liquidity to earn interest and in turn, NFT holders are able to instantly borrow ETH through the lending pool using NFTs as collateral
2. So how do the loans work?
— Cirrus (@CirrusNFT) August 17, 2022
Most NFTs are collateralized at 30-40% of floor value
So if I take a loan on an ape at 100E floor I can expect to receive a 30-40e loan at a 15-25% interest rate
Cool right?
Until it's not.
3. Whats that supposed to mean?
— Cirrus (@CirrusNFT) August 17, 2022
If you allow the health factor (defined below) of your loan to fall below 1, your NFT is put up for a 48 hour auction and sold to the highest bidder if you don't repay the loan in time. pic.twitter.com/ntDNtScij8
A health factor below 1.2 means you are in the danger zone.
— Cirrus (@CirrusNFT) August 17, 2022
A 17% drop of your NFTs floor triggers a liquidation.
Here's the terrifying part.
There are currently 45 BAYC with a health factor at or below 1.2 pic.twitter.com/f9EwAbcB1l
4. Okay stop you're scaring me
— Cirrus (@CirrusNFT) August 17, 2022
It gets worse.
See that spike in lending volume at the end of April?
85% of those are loans taken on MAYC and BAYC at 30+ and 125+ floors
It would appear that NFTs should not qualify as pristine collateral… pic.twitter.com/tA4AvjZL5F
5. Well surely there aren't THAT many collateralized apes right?
— Cirrus (@CirrusNFT) August 17, 2022
Wrong.
2.8% of BAYC supply and 1.6% of MAYC supply are currently in the BendDAO wallet
There are other platforms like NFTfi that also have a sizable amount of outstanding loans pic.twitter.com/DCvCDithhL
6. So WTF happens next?
— Cirrus (@CirrusNFT) August 17, 2022
To me a liquidation spiral on these is a matter of when, not if.
NFT Volume is at yearly lows and there simply isn't enough liquidity in the market to absorb all of these liquidations without a serious impact on floors.
We saw the first few liquidations of mutants due to low health factor loans this week
— Cirrus (@CirrusNFT) August 17, 2022
Unless borrowers suddenly start paying off loans in bulk, there's a good chance we see quite a few more in the near future pic.twitter.com/rbs1S9YLko
If and when the dominos start following it'll be one of the most opportune buying windows for MAYC and BAYC ever.
— Cirrus (@CirrusNFT) August 17, 2022
For the sake of my fellow apes I hope that this disaster is somehow averted, but the reality is that the chances of that aren't looking too great…
More FUDs on Binance CEO
A thread on this FUD today. 163, a major news site in China, ran a story that Google translates to:
— CZ 🔶 BNB (@cz_binance) August 18, 2022
“Changpeng Zhao, the founder of Binance, was arrested in the mansion during the FBI raid, and a room of BNB and BUSD was found in the basement of the mansion.” 1/6 https://t.co/nRrGWlSt2r
Original text:
— CZ 🔶 BNB (@cz_binance) August 18, 2022
币安创始人赵长鹏于FBI的突袭中在豪宅被捕，现场在豪宅地下室搜出一屋子的BNB和BUSD。
2/6
Even with the hilarious reference to “room full of BNB” which obviously shows it is fake news. But given it was 163, the news was picked up and mirrored by many other news sites in CN, and quickly spread in many social media groups.
— CZ 🔶 BNB (@cz_binance) August 18, 2022
3/6
#BNB price dropped from $310 to $301 in minutes, but have since bounced back.
— CZ 🔶 BNB (@cz_binance) August 18, 2022
Now, the original article is removed. Many copies of it are still available on other sites.
4/6
3 years ago, The Block, ran an article saying the Binance office was “raided by the police”. The article was copied by other sites, and spread very quickly on social media. A lot of clicks.#BNB dropped from $24 to $18 that day, erasing $400m or so in market cap.
— CZ 🔶 BNB (@cz_binance) August 18, 2022
5/6
Three days later, The Block changed the title from “raided by police” to “visit by authorities”.
— CZ 🔶 BNB (@cz_binance) August 18, 2022
Facts.
6/6
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