Best Twitter thread of the day – August 18th

Crypto whales can change the market.

Understanding how their trades impact the market can give you an investing edge.

Here’s how whale movements affect the market ?

— Pothu (@cryptoPothu) August 17, 2022

There are several types of transactions that whales can make. The most important are:

• sending crypto to an exchange
• sending crypto to a wallet from an exchange
• wallet to wallet transactions

Each of these has different price signals.

— Pothu (@cryptoPothu) August 17, 2022

1. Sending crypto to an exchange

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

— Pothu (@cryptoPothu) August 17, 2022

When you see a cryptocurrency being sent from a regular wallet to an exchange wallet, it usually means that someone is about to sell.

If you see hundreds of millions of dollars of a cryptocurrency being sent to an exchange, this could mean huge sales are coming.

— Pothu (@cryptoPothu) August 17, 2022

2. Sending Crypto to a wallet from an exchange.

In the picture below 2000 ETH is being withdrawn from KuCoin. pic.twitter.com/yalpMuXHA9

— Pothu (@cryptoPothu) August 17, 2022

When whales move crypto off of an exchange they're less likely to sell.

They could be taking profits or moving money to cold storage.

— Pothu (@cryptoPothu) August 17, 2022

Suppose there are enough whale movements off exchanges and into wallets for a specific cryptocurrency.

The sudden reduction in market-ready supply can be rocket fuel for positive price action.

— Pothu (@cryptoPothu) August 17, 2022

3. Wallet to wallet transactions

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).

— Pothu (@cryptoPothu) August 17, 2022

OTC allows big investors to buy or sell large amounts of cryptocurrency directly from an exchange or cryptocustodian at a fixed price.

Wallet to wallet transactions are a red herring.

— Pothu (@cryptoPothu) August 17, 2022

These transactions don’t typically influence the market significantly.

It’s impossible to know who’s buying or selling until it’s too late.

— Pothu (@cryptoPothu) August 17, 2022

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?

This depends on market depth.

Market depth tells you how much money is required to push the price of a cryptocurrency up or down.

— Pothu (@cryptoPothu) August 17, 2022

The more money it takes to push up or push down the price by 2% the greater the market depth that crypto has.

You can easily check a token's market depth under the Markets tab on CoinGecko or CoinMarketCap.

— Pothu (@cryptoPothu) August 17, 2022

In the picture below you can see the market depth for ETH by exchange.

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

— Pothu (@cryptoPothu) August 17, 2022

Market depth is significant when considering how a whale movement will affect price.

If you see 10 million dollars worth of ETH being transferred to an exchange then the effect on price could be negligible.

— Pothu (@cryptoPothu) August 17, 2022

There are currently 32,267 ETH ($59,048,610) worth of NFTs being used as collateral for loans on BendDAO alone

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

— Cirrus (@CirrusNFT) August 17, 2022

1. WTF is BendDAO?

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

— Cirrus (@CirrusNFT) August 17, 2022

2. So how do the loans work?

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.

— Cirrus (@CirrusNFT) August 17, 2022

3. Whats that supposed to mean?

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

— Cirrus (@CirrusNFT) August 17, 2022

A health factor below 1.2 means you are in the danger zone.

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

— Cirrus (@CirrusNFT) August 17, 2022

4. Okay stop you're scaring me

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

— Cirrus (@CirrusNFT) August 17, 2022

5. Well surely there aren't THAT many collateralized apes right?

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

— Cirrus (@CirrusNFT) August 17, 2022

6. So WTF happens next?

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.

— Cirrus (@CirrusNFT) August 17, 2022

We saw the first few liquidations of mutants due to low health factor loans this week

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

— Cirrus (@CirrusNFT) August 17, 2022

If and when the dominos start following it'll be one of the most opportune buying windows for MAYC and BAYC ever.

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…

— Cirrus (@CirrusNFT) August 17, 2022

A thread on this FUD today. 163, a major news site in China, ran a story that Google translates to:

“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

— CZ ? Binance (@cz_binance) August 18, 2022

Original text:

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

— CZ ? Binance (@cz_binance) August 18, 2022

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.
3/6

— CZ ? Binance (@cz_binance) August 18, 2022

#BNB price dropped from $310 to $301 in minutes, but have since bounced back.

Now, the original article is removed. Many copies of it are still available on other sites.

4/6

— CZ ? Binance (@cz_binance) August 18, 2022

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.

5/6

— CZ ? Binance (@cz_binance) August 18, 2022

Three days later, The Block changed the title from “raided by police” to “visit by authorities”.

Facts.

6/6

— CZ ? Binance (@cz_binance) August 18, 2022