Degen Hunting 101 - How To Actually Find Alpha
Degen Hunting 101 - How To Actually Find Alpha
Generate conviction or get rekt
After reading this, you can disregard the vast majority of empty Twitter threads stating the obvious. My goal with this substack is not to simply give you the alpha, it is to ensure you know how to find it yourself. You should not have to rely on me or anyone else to spoon-feed you “calls” as that is a recipe for disaster.
Here’s a 0-1 method that is bound to lead you into rabbit holes that will make your wallet very happy in a long enough timeframe.
Alpha Finding 101
Find tokens with recent pumps (DO NOT APE)
Go back in time and identify wallets with large purchases (dexscreener/etherscan depending on preference, a mixture of both normally works well) —> identify who was first as in many cases wallets follow a “leader” that gives them alpha. Let’s do an exercise for GAMMA token. In this chart, you want to locate large purchases between the 12th of March and to 26th of March before it pumped.
Create a table from the downloaded CSV and sort “Quantity” by descending and filter for “Swaps” and other transactions you’re interested in. Now, you have the wallets of large purchases (large purchases are subjective).
Backlog the wallets that interest you to see if they consistently buy tokens early and sell with profit, don’t let one trade fool you, we all get lucky (even me). You can use debank for this or whatever you prefer.
One of the wallets that were within the early large Gamma purchases, note that he only has 6 followers. Sorry to this guy after the number of people that reads this start tracking him. Create a separate excel file that maps wallets that have been early to multiple tokens
Do not get blindsided by their wallet value as you don’t know what amount they started with unless you do rigorous research. Don’t disrespect smaller wallet portfolios (5 figs) that are trying to make it as these are the hungriest. I like tracking 5 figs and 6 figs portfolios for early alpha, I’ll get to why later.
Let me make this clear, being early to a token feels absolutely disgusting. There is nothing comfortable about it as you know it could easily go to zero. If it’s obvious then you’re not early (it doesn’t mean that you’re late but the upside is more limited).
If you’re early to a project and you see multiple wallets of your watchlist aping the same thing, you might just get lucky as you now got confirmation from other smart traders. You will have some misses but if your hit rate on gems is >51% and they provide multiples on many instances then you’re going to print.
Get a partner/group to check yourself
If you want to go fast go alone, if you want to go far go together. There is only so much research and alpha that a person can accomplish in one day, teaming up with someone will make things easier you that can check your bias when you have ideas or want to snipe a token.
It’s better if the people in your group haven’t made it yet and are hungry, grinders get the job done.
Your group chat needs to be hungry degens that aim to consistently be early to plays. If they aren’t, find others. There are plenty of willing grinders out there that haven’t found their tribe yet.
Smaller wallets
Smaller wallets are the hungriest as they have a dream of making it which is why they become so valuable if you can identify the ones that do well. Someone with a 7-figure portfolio has no need to take as much risk as a 5-fig portfolio that aspires to make it. Some of the wallet portfolios that are small when you find them will be the ones that will make a Twitter thread in some months/year that demonstrates how they took x amount to x amount. You want to find them before they become popular. If you have a larger size than them, good you can now find those projects as early, dive into them and see if it’s an interesting project and decide if you want to take a position with a larger size than the one that led you to it.
Now, don’t get me wrong. You probably should have selected larger ones that are good to track for swing plays. Most likely, if the larger ones buy your tokens, there will in most cases be an influx of other people following them, providing a good opportunity to take profits.
Do not copy trade
Don’t simply copy trade good wallets you find. The person you are copying has a completely different thesis to you perhaps. They have a different risk tolerance based on their portfolio in comparison to yours.
If you have a 10k portfolio and are following someone with a 500k portfolio, that person aping 8k in a play equals 0.8% of their portfolio and would be a nothing burger if it went to zero. For you, that is 80% which would make you too emotionally invested if the chart doesn’t move as expected and you wouldn’t be able to sleep. While you’re hoping for 10x your competition is happy with a 20%. It pumps and you’re happy and then what? If the token dumps, you are devastated. I can’t stress this enough and still some of you won’t listen. Hope is not a strategy.
For instance, people blindly copy trade Digits DAO which is well known to be a decent trader despite the founder iterating that you should not do so. When an entity enters a position with size they rather make 10% on a large amount of capital than 50% on peanuts. You don’t want to be the one that sells after a large entity has entered and sold —> you’re now holding the bag. Copytrading large players is like a Mexican standoff (token pumps - who sells first?) and you don’t want to end up 2nd in that battle.
Do not ape based on Twitter
Twitter is designed for bear market exit liquidity. In a bull market there is enough capital flowing around that can sustain hype when it reaches Twitter. During bear markets, it’s just a CT PvP that is designed to generate eyeballs that can be dumped on as they FOMO into a trade. Don’t be that guy, it's a one-way highway to the shadow realm.
As you get the opportunity to find projects early. Use this newfound competency with decency and don’t become a shiller, thanks. You will be punished in due time for it (some of you shill 2 minutes after you buy a token making it easy to find your wallets as well, you know who you are). You should not have to rely on shilling if you become a good alpha finder anyway, let the people come into your positions instead of forcing it down their throats.
If a wallet you’re tracking ends up on Twitter, it’s not alpha anymore and you can disregard it from your main wallets tracked (in a bear market). You don’t want to follow wallets that Twitter threadoors post in their threads as the alpha is instantly gone when the wallet now has 500 eyeballs on it (it generates good exit liquidity though). People fail to realize that wallets with a large following show you what they want to show you. Using the method I’ve gone through in this article should allow you to find countless good wallets with minimal followers.
There is a reason why I won’t share specific wallets that I track. I like money more than engagement and you can draw your own conclusions when you see people sharing wallets on Twitter that they found.
Why am I sharing this? Because the vast majority will like this content, but 90% won’t execute it anyways as it is time-consuming. You can use this as a manual whenever you want to get your hands dirty and find early plays. I have a set amount of hours I dedicate to this every week. The ones that do this on a long enough timeframe will outperform. As a famous Bull usually says: Equal opportunity, unequal results.
Enjoy your alpha hunting.
Thanks for reading this, this is a glimpse of what I normally provide the advanced stack with frequently.
Well done if you managed to congest all that information, I hope you enjoyed the post. Don’t forget that you are more than welcome to leave feedback or drop any questions in the comment section.
Sharing this post helps it reach out to more readers which would be great. If you are interested in future posts from me, do not hesitate to subscribe. Thanks for taking the time!
Disclaimer: All Content on this site is information of a general nature and does not address the circumstances of any particular individual or entity. Nothing on the site constitutes professional and/or financial advice, nor does any information on the site constitute a comprehensive or complete statement of the matters discussed or the law relating thereto. I am just a random degenerate sensei sharing an opinion.
Banger content like always, Mr. Sensei
Thanks for this content, Sensei.. I'll start spend time to find alpha every week