From On-Chain Data Analysis to Trading Strategies: Insights from a Seasoned Trader

In the field of cryptocurrency trading, a trader from Taiwan has stood out with his unique data-driven strategy. After entering the cryptocurrency space in 2017, he worked in the listing department of an exchange, focusing on on-chain data analysis and project due diligence. This experience not only allowed him to accumulate extensive industry knowledge but also laid a solid foundation for his future data analysis.

In 2022, this trader left the exchange and embarked on an entrepreneurial journey. Initially, he focused on NFT project development, but as the market changed, he keenly sensed the potential of Memecoin trading and quickly adjusted his direction, shifting his focus to on-chain trading and data-driven investment decisions. He and his team developed various analytical tools and trading bots to monitor on-chain address movements and generate trading signals.

This trader's strategy is characterized by a clear focus: instead of paying attention to narrative valuations, he concentrates on on-chain monitoring and strict profit-taking and stop-loss rules. He emphasizes that by setting clear profit-taking and stop-loss strategies, one can effectively avoid subjective emotional interference in trading. At the same time, he points out that trading logic needs to be continuously optimized. From initially focusing on on-chain smart money trading behaviors to later expanding to team trading behaviors, and then to the key main addresses of individual tokens, he continuously improves the accuracy of trading decisions through in-depth analysis of these on-chain activities.

Currently, his main holdings include BTC, ETH, and SOL, forming his core investment portfolio. Recently, a project named MOODENG became an important milestone in his trading career, achieving a 5000-fold return in a short period. However, for him, the true value of MOODENG lies in validating the effectiveness of his data-driven strategy. By tracking the on-chain behavior of MOODENG's main addresses, he confirmed the trading theory of "following the big players," which not only enhanced the credibility of his strategy but also provided valuable experience for future trading decisions.

Data-Driven Trading Strategies

The trader emphasizes the standardized strategy of "doubling down and cutting losses in half," which is central to their risk management. This strategy avoids market sentiment interference through clear rules and verifies the feasibility of positive expected value (EV) through mathematical models.

In trading, simply maintaining a win rate of over 33% can achieve a positive EV. For example:

• Take-profit scenario: Sell all after the assets double, achieving a 100% return.
• Stop-loss scenario: sell all after the asset is halved, resulting in a 50% loss.

Based on the above assumptions, when the win rate reaches or exceeds 33%, the trader's long-term returns will show positive growth. This trader's strategy is probability-based, focusing on maintaining a stable mindset and avoiding fluctuations in trading decisions due to short-term market volatility.

At the same time, his team developed a series of tools centered around data to provide users with deep insights into market trends and major player behaviors:

Token Insider Analysis Tool

Analyze the holding structure of tokens and address behavior through big data. Its core functions include:

• Major Behavior Identification: Filter out addresses that have transfer associations or collective trading characteristics, classifying them as "gang" or "major clusters."
• Snapshot and trend analysis: Qualitative and quantitative assessment of the token's holding concentration to identify whether the main force is accumulating.
• Behavior Model Optimization: Combining the transfer behaviors of addresses (such as the use of cross-chain bridges or mixers) and on-chain capital flow trends to form accurate predictions of major operations.

Real-time Trading Signal Tool

This is a real-time trading signal tool developed based on a database of thousands of smart money addresses accumulated by the team. When a group of historically high-performing addresses collectively buys a certain token within a short period in the market, this tool will issue a signal. This signal can help users quickly capture market hotspots and determine whether the token has potential for short-term price increases.

These tools provide users with a complete trading support system. For example, when the token insider analysis tool shows that the main force's accumulation level of a certain token has reached a peak, while the real-time trading signal tool captures the collective buying behavior of multiple smart money, this usually indicates that the token may become a market hotspot. Users can establish positions and track trends based on the data provided by the tools, combined with the strategies of doubling down and stop-loss at half.

Strategy for Capturing Main Force Trends

In the cryptocurrency market, the main players profit through accumulation and distribution, and during this process, the on-chain holding behavior inevitably changes. The core of the trading strategy lies in how to capture the behavior patterns of the main players through data. For example, during the accumulation period, the main players exhibit specific on-chain behaviors, which can be aggregated and transformed into trading signals.

However, as more people adopt similar strategies, the main players may adjust their strategies or even hide their behaviors. Therefore, the effectiveness of trading strategies needs to be continuously adjusted and optimized to identify the possible hidden behaviors of the main players. This trader believes that this is an ongoing game, and a dynamically optimized monitoring model is key to the long-term effectiveness of the strategy.

His strategy starts with tracking "smart money," which usually has a win rate of over 40% in the market and achieves significant returns. By using tools to filter out these addresses, he established his own DAO and monitoring list with his team to continuously monitor a group of high-performing address clusters.

The core methods of the strategy include:

• Identify Collective Actions: Team monitoring has found that certain address clusters synchronize their operations, including collective accumulation and distribution behaviors. This pattern becomes the foundation of the strategy.
• Position Control: When following the main force, avoid entering the top 100 holdings list to maintain a low profile and not affect the main force's trading rhythm. Usually, the buying position does not exceed 0.5% of the market value of the token.
• Signal Response: When a cluster in the monitoring list collectively enters a certain token, the strategy follows up with small exploratory amounts to avoid prematurely exposing its own behavior.

MOODENG Trading Case

The successful transaction of MOODENG is an important milestone for this trader's team. In September 2024, the team monitored a large-scale entry of a long-performing address cluster into MOODENG and swiftly accumulated funds. The team maintained small purchases and gradually followed up based on the main players' previous trading strategies.

During the trading process, the main players test the market's buying and selling sentiment through multiple rises and pullbacks, while ensuring that the concentration of chips is not diluted. By monitoring the changes in the holding ratios of these main addresses in real-time, it is found that the main players will buy again after each pullback. This phenomenon has strengthened the team's bullish confidence in MOODENG.

In the end, MOODENG rose from an initial small market capitalization to several hundred million, and the team not only achieved high returns but also validated the trading theory of "following the main force" through this process.

Seize the opportunities of market capital rotation

The cyclical changes in the cryptocurrency market have a significant impact on the execution of trading strategies. From a macro perspective, the focus of funds during different periods may vary:

• Mainstream coin rotation: Funds may be concentrated in mainstream assets such as BTC and ETH, during which on-chain liquidity is scarce and trading volume is low.
• Emerging public chains and hotspot switching: Ecological hotspots will switch between public chains, such as the recent transition from ETH to Base, then to BSC and finally to Solana. Solana has become a breeding ground for high-frequency trading and innovative projects due to its high TPS and low Gas fees.
• Meme track and narrative shift: In more segmented tracks, such as Meme tokens, funds will also rotate due to updates from launchpads or changes in narrative. For example, from the high-frequency PVP market on Solana to new projects on the Base chain, the focus of market funds is constantly shifting.

Using on-chain data tools, this trader's team monitors on-chain trading volumes and capital flows in real-time to assist in decision-making. For example, recent capital rotation indicates that emerging virtual economies on-chain (such as AI Agents and Virtuals) have become hot spots, which suggests the team needs to timely adjust their positions and follow the flow of funds.

The Importance of Staying Calm and Disciplined

Bull markets provide a lot of opportunities, but they also come with high risks. In such a market, it is particularly important to maintain calmness and discipline:

• Independent Judgment: This trader emphasizes that trading should focus on validating strategies rather than succumbing to market sentiment. He points out that emotional fluctuations during a bull market can easily lead traders to be misled by the narrative of an "eternal bull market," resulting in excessive optimism.
• Timely profit-taking: A major pitfall in a bull market is "reluctance to sell." Even if the market is rising, taking some profits off the table is key to maintaining long-term advantages. Even if you miss out on higher points, managing risk always takes precedence over chasing higher returns.
• Support of stable cash flow: Cash flow is the anchor for calm trading. Obtaining stable cash flow through main business operations or quantitative funds can reduce dependence on short-term market fluctuations, making trading more composed.

In a bull market, traders often face anxiety, which includes: fear of missing out on opportunities, returns not meeting expectations, and psychological fluctuations caused by short-term pullbacks. In response, this trader also shared his coping strategies:

• Focus on the trading framework: Trades that exceed the framework, even if profitable, are not considered successful. The core of trading is to validate strategies and refine understanding, rather than temporary gains.
• Establish an environment for calm communication: Avoid interference from emotional signals and maintain communication with calm and rational trading partners. Especially in a bull market, overheated emotions can easily lead to irrational decisions.
• Remember the cyclical nature of the market: He pointed out that a bull market is not "eternal," but rather a cycle where opportunities and risks coexist. Even with strong bullish sentiments, one must remain vigilant about risks, especially when there is only a single narrative in the market without clear supporting logic.

Methods to Quickly Enhance Cognitive Level

This trader believes that the core of personal growth lies in upgrading one's social circle, and communicating with high-cognition individuals can significantly accelerate one's cognitive iteration. He emphasizes that breaking out of the social comfort zone and actively interacting with outstanding people is an important way to enhance oneself.

In the process of trading and entrepreneurship, he finds his own breakthrough by continuously learning from the successful experiences and methods of others. The influence of communication with people is subtle and gradual. The actions and results of successful people around him inspire him to think and further optimize his own path. He advocates "upward socializing", discovering more possibilities through interaction with better individuals.

He also mentioned that "Rich Dad Poor Dad" is a book that has a profound impact on his financial thinking. This book emphasizes the concept of the four quadrants of wealth and teaches him to think about wealth management from the perspective of "making money work for you." He noted that this book breaks the traditional education concept of "stable jobs" and inspires him to explore the possibilities of entrepreneurship and investment.

In addition to books, his progress has also benefited from other sources of knowledge. For example:

1. On-chain analysis KOLs: Some well-known individuals focused on on-chain data analysis who provide in-depth market insights. There are also experts based on market behavior and human analysis, explaining the logic of the main players' behavior from another perspective.

2. Social Media and Community: By following active traders on social platforms, quickly capture market trends and discuss new tracks and business opportunities with team members.

In addition, this trader believes that the integration of cognition between Web2 and Web3 is an important direction for the future. He and his team often study business cases in Web2 to explore how to replicate its successful models in Web3. This cross-domain thinking keeps him ahead in the exploration of new tracks.

Summary and Suggestions

• Data-driven and continuous optimization: Data-driven trading strategies have been validated as feasible in practice, but require continuous dynamic tuning. In addition, whether it is the rotation of on-chain hotspots or the switching of track narratives, sensitivity and adaptability must be maintained.

• Patience and Discipline: Successful trading relies not only on strategies but also on a stable mindset. Whether in a bull or bear market, following trading rules and maintaining independent judgment is essential for gaining a long-term advantage.

• Establish cognitive and cash flow pillars: With a stable cash flow as a foundation, traders can face market fluctuations with a more composed attitude. By "continuous learning" and "upgrading circles", keep oneself at the forefront of knowledge.