Key takeout
Smart Money is made up of institutional investors with advanced tools and knowledge that can affect crypto market trends.
Key concepts such as order blocks, liquidity zones, and fair value gaps help traders to align with their smart money strategies.
Real-time tracking tools like GlassNode, Nansen, and Coingecko allow traders to follow and take advantage of smart money movements.
Following the movement of smart money is similar to navigating the open sea.
Smart money refers to money invested by individuals or organizations who know the domestic and international markets. We’re talking about institutional investors, hedge funds and the right traders. These are large players with access to more information and tools than most of us, and use that knowledge to make strategic decisions.
In the Crypto world, “smart money” is particularly powerful as the market is still growing rapidly. These investors have a major impact on the market. Their movements can shake things up and down prices, or even change the way people feel about certain coins and tokens.
For example, major players like BlackRock launching the Bitcoin Exchange-Traded Fund (ETF) can impact Bitcoin (BTC) prices and the broader market, causing waves to the market.
How do institutional investors influence crypto market trends?
Institutional investors have considerable financial muscle and entering the crypto market can have a major impact in several ways.
Liquidity and stability: These investors bring large amounts of capital, making buying and selling easier without dramatically affecting prices. This helps to stabilize the market and makes it more attractive for other investors to get involved. When more money is flowing smoothly, it creates a healthier and more balanced market.
Price Movement and Volatility: If these large players make large investments (or sell out their holdings), the price could move up and down quickly. This can create volatility, but it also opens the door for traders to take advantage of these price movements.
Regulation and legitimacy: As institutional investors become involved, they will help drive clearer regulations and bring more legitimacy to the crypto sector. For example, the approval of the Bitcoin ETF gives institutional investors a regulatory way to invest in Bitcoin, which overall makes the market more reliable.
In short, smart money is invested by experienced, informed players who make strategic moves, but ordinary money is often invested by individuals with no deep market knowledge or insight.
Smart Money Concept (SMC) in Crypto Trading
SMC is a trading strategy focused on analyzing and capitalizing smart money movements. Key elements of SMC include order block, liquidity zones and fair value gaps. Let’s break these apart easily.
Order Block (OB)
Order block is the area of ​​a chart where large investors (smart money) place large buy or sell orders. These areas usually act like walls of support or resistance. That is, it’s a powerful level where prices tend to bounce back. You can find order blocks by looking for large clusters of candlesticks at a specific price level. Often these are periods of sideways price movement, followed by sharp movements up and down.
Once prices return to these areas, expect it to react in some way.
Liquidity Zone
A liquidity zone is a collection of buy and sell orders at a specific price range. These are like collecting where many market participants are placing their orders and creating areas where price reversals and breakouts are likely to occur.
Smart money investors love these zones. This is because you can make large transactions without moving dramatically in one direction across the market. Understanding where the liquidity zone is can help you predict where the market will go next.
Fair Value Gap (FVG)
There is a large imbalance between asset buy and sales orders, and gaps in the chart create a fair value gap. This usually occurs when prices move quickly without making many transactions between them, and these gaps can be found as space between candlesticks.
These gaps act like a price magnet. Markets often return to fill these gaps and continue that trend. Finding a gap can be a great opportunity to enter the market.
How to track smart money movements in real time
There are several tools that can help you decode your blockchain data and find smart money instantly.
1. GlassNode
Category: On-Chain Analysis
Website: GlassNode.com
GlassNode provides visibility into blockchain data that is not available on price charts alone. It shows how cryptography flows between wallets, exchanges, and large owners. This is great for tracking institutional activities.
Important features of smart money tracking:
Exchange inflow/outflow: Beware of sudden spikes of BTC or ether (ETH).
Whale Indicator: Metrics such as “number of addresses holding 10K+ BTC” can help identify when whales are accumulating or distributed.
Realized cap and dormant state: This indicates whether the old coin is moving or not. It is often a clue that long-term holders (smart money) are relocated.
The best tip! If you notice a sudden drop in replacement reserves of ETH on GlassNode, it may indicate that the whales are pulling ETH to refrigerated storage (a bullish sign). Combining this with price action can lead to a high degree of confidence in entry points.
2. Nansen
Category: Wallets and Whale Tracking
Website: nansen.ai
Important features of smart money tracking:
Smart Money Dashboard: A curated list of wallets considered “smart” based on historic returns and actions.
Token God Mode: See what Token Smart Money is buying and selling and how its holdings have changed over time.
Real-time Alerts: Sets alerts for transactions due to the movement of a specific wallet or token.
The best tip! Make sure that over the last 24 hours, multiple smart money wallets have begun purchasing low cap Altcoin. That could be a sign that they know something before the broader market does. You can monitor breakouts and act accordingly.
3. Coingecko
Category: Market Data and Volume Analysis
Website: coingecko.com
Important features of smart money tracking:
Volume Spikes: Beware of sudden increases in volume over 24 hours that have not yet been reflected in the price. It is often a prelude to movement.
Liquidity Data: Find deep liquid coins that the institution may operate.
Exchange data: Monitor the volume for each exchange. If one exchange suddenly has massive purchase pressure, there is a chance that smart money will become active.
The best tip! Perhaps in the small cap tokens, you’re seeing spikes that have five times the volume of the binance, but haven’t moved much price yet. That difference can indicate accumulation. You can use Onchain Tools Nansen or GlassNode to dive deeper to see.
4. Santimento
Category: Market sentiment and on-chain analysis
Website: santiment.net
Important features of smart money tracking:
Social Volume and Emotion: Measure the level of hype around the token. Smart money often refutes the crowd.
Whale Transaction Count: See the number of large transactions (over $100,000) occurring on a particular coin.
Development Activities: Some smart money tracks developer activity as a long-term value proxy.
The best tip! Tokens reduce positive sentiment, but see a surge in whale trading. That cutting can show that smart money is accumulating during the retail outlet, a classic paradoxical play.
5. Chain dialysis
Category: Blockchain forensics and risk detection
Website: ChainAlysis.com
Chain Orisis focuses on risk detection and compliance, but can track large, risky wallet movements and avoid trapped and manipulated markets.
Important features of smart money tracking:
Address Label: Know if your wallet belongs to a replacement, scam, hacker group, or facility custodian.
Transaction monitoring: Track the origins of large influx/outflows and funds. Are they from the Defi protocol, over-the-counter (OTC) desk or mixer?
Risk Scoring: Avoid getting caught up in tokens and wallets related to pump and dump schemes and hacking.
The best tip! If you see a large amount of ETH sent for exchange from wallets flagged as known defi vc, it could be a sign of future sales pressure. Conversely, tracking the inflows from the institution into the cold wallet can be a bullish signal.
Follow the war of men
Think of cryptocurrency transactions as the open sea. Smart Money is a powerful human warship, navigate with advanced tools and knowledge. As a retailer, you may not be managing these ships, but you can follow their course.
Platforms like GlassNode, Nansen, Coingecko, Santiment and Chainalysis allow you to track your smart money movements in real time. You may not pilot the ship, but by observing its wake, you can adjust the course and position yourself for useful opportunities.
There is no need to command the ship. Follow that lead and find a safe, profitable coastline.
