Wallet Watching - Behavioral psychology
Wallet Watching - Behavioral psychology
Strengths & Weaknesses
I’ve posted in a prior post how you can find significant alpha by finding good wallets yourself and putting the time in. While that is undoubtedly true, there are a few things you can do to increase your hit rate even higher. No wallet you find will have a 100% hit rate and since the majority of you care more about making money and finding a good entry than the tokens you are holding specifically, this should provide some valuable information for you.
With that said, let’s dive in.
Everybody gets lucky
A wallet being early to a token doesn’t mean that they are skilled, when you spend significant time wallet watching you will find that there are people that stand out and there is a clear distinction between luck and skill. But how do you determine this yourself and not get rekt apeing into the same tokens as them?
You need to find the strengths and weaknesses of the wallets you track. This is why after having gone through sufficient wallets you will most likely narrow it down to a select few that is worth tracking on a consistent basis. You will probably get to know their behavior at this stage like their pseudo-behavioral psychologist.
I’ll use an example of the ones I track to indicate what types of behavior you might want to identify.
Wallet #1 on DS tracking list
Extremely good at finding narratives and tokens early, track record of getting multiples on his/her entry. However, this person is a diamond-handed holder that is willing to hold through trials and tribulations. Thus, the person has a tendency to roundtrip positions despite being up very heavily.
Niche strength and weakness: Very good at DeFi, bad at memecoins.
How do I mitigate this? If the token intrigues me and I decide to enter as well, sell half on a double to ensure I don’t lose money.
Wallet #2 on DS tracking list
Good at finding good entries, clearly a very good trader. Track record of selling range tops of tokens that are due for a pullback. However, due to his/her risk management, he can miss out on a 10x due to responsible profit-taking (which isn’t necessarily bad btw), and clearly has a disciplined profit-taking strategy.
Niche strength and weakness: Very good all around, sacrifices 10x to consistently take profits at smaller ranges to plug away steadily. Sprays and prays memecoins (and never seems to sleep, relentless character).
How do I mitigate this? If this person enters a token I am holding and sells his position at a certain level. Most likely I should take some profit off the table around those levels too.
Wallet #3 on DS tracking list
Pump and dumper. This guy loves to shill on Twitter and you know that some impending volume is coming whenever he buys a token that he will shill to his Twitter followers. Does mainly micro-cap tokens and shitcoins that are very volatile.
Niche strength and weakness: Good at micro-cap tokens, although probably not really alpha in my opinion.
How do I mitigate this? Sell into pumps that come from his shilling.
The list can go on but the main thing to take from this is the value in understanding the behavior of the wallets you’re actually watching instead of simply noting what they are buying. This is why I iterate that blindly copytrading anyone will absolutely kill you as you’re most likely not aware of their hit rate and behavioral patterns and skills.
One thing I currently don’t track that I should add to my list are wallets of known top signals but that’s some homework for me.
Cross-Pollination
Bear in mind that if multiple of the wallets you’re tracking are entering the same token (which can be prevalent during memecoin season) you can now combine their strengths to play the game to your advantage. Considering you know how they normally act you should have an edge in the PvP game that consistently looms over these markets.
If you do this enough you’ll also realize that the vast majority have a clear weakness and have no idea what they are doing at times. No matter how good someone can larp on Twitter, everybody has a weakness, and mental models and risk management strategies are supposed to protect you from these said weaknesses.
All of this will make you a better wallet watcher over time and in time hopefully your wallet will be one other will seek to watch. With that said I’ll keep this short and concise.
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.
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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.