Onchain Liquidity Games
Here's a brief summary, based on my research, of the characters playing onchain liquidity games.
Developers & Insiders
◦ Fake utility slow rugs or "exploited:"
◦ These were very popular during the initial AI craze because no one understood AI but everyone wanted "early" exposure.
◦ They never complete more than 1% of their roadmap, are often hyped by KOLs.
◦ Team often bundle snipe the launch. They allocate a bunch of the supply to themselves before anyone else can, as part of the contract launch. Then they hide the tokens in many wallets before selling.
◦ Either slow rug after an initial pump or a few weeks of pumping, or they encounter an exploit and hard rug after amassing a large MC in the 20-100ml range.
◦ Involve cartels that repeatedly release fake projects that follow current hot narratives. These projects are often derivatives of larger VC backed more successful projects.
Programmatic Snipers
◦ Custom bots that systematically snipe many ETH launches.
◦ Bots follow certain parameters based on the smart contract and volume.
◦ Aim to hit 10-100x on a few launches out of sniping many that fail or rug. Almost like a form of yield.
Manual Snipers (ETH)
◦ Probably some of the most profitable onchain traders in the space.
◦ Search to discover new contract addresses, or receive contract addresses through insider knowledge.
◦ Simulate the contract to check it for safety and other metrics that determine it's potential, or who the team is.
◦ Outbid other snipers on contract launches that are promising.
◦ Snipe a large part of supply for promising onchain launches or stealth launches that don't have any anti-sniper defense or don't use a pre-launch platform like Fjord.
◦ Will snipe using many wallets to own a large part of the supply, more than 1%.
◦ In many cases, projects are at the mercy of snipers, who can dump the project to 0 in it's early stages.
◦ Many snipers enter projects and PVP one another hoping that dumb money enters and MC reaches 500k-1ml before all snipers sell and the project dies. This occurs daily on ETH Mainnet.
◦ Snipers who combine some FA and ML to determine which contracts may result in profitable launches that exceed 5ml MC or further have dramatically outperformed over the last year.
◦ Most snipers hold tokens for less than a few hours.
Onchain Data Traders
◦ Track sniper and insider actions.
◦ Track profitable (top PNL) wallet actions.
◦ Track volume and holder alerts.
◦ Typically will buy post sniper sell off on strong projects; or, will buy even knowing that snipers own a large part of the supply if the launch is very promising.
◦ Usually apply some form of basic FA or narrative analysis to new launches,
◦ Longer term holders.
◦ Has diluted and increased in popularity due to onchain trading become a growing content sector in the space and more onchain services becoming available to retail.
◦ Are exit liquidity for those mentioned above.
◦ Often these traders are PVP one another over new launches that will inevitably go to 0. It's just a matter of who is earlier.
◦ Rely on dumb CT, KOLs, or other later onchain traders for exit liquidity.
Other Traders
◦ Have not learned how to use Etherscan or how to check basic data metrics of tokens.
◦ Receive information from call groups, KOLs, and CT.
◦ Slower traders, tend to buy hype.
◦ Believe crypto has utility outside of speculation.
◦ A step behind with narratives.
◦ Probably only been in the space for less than a year or so.
◦ These traders have most likely given up on buying new utility rugs or memes. Or they slowly begin to learn onchain and graduate to the above category.
Summary
Onchain trading is a liquidity game among developers, snipers, onchain data traders, and everyone else. As less liquidity enters the onchain space, the games become more competitive among the participants, resulting in those near the top of the pyramid collecting most of the rewards.
Note: This brief outline is based on my knowledge gained over the last 8 months. Some ideas may not be 100% accurate. Please leave feedback if you disagree.