Home Ethereum Institutions begin to buy: Interview with Nansen

Institutions begin to buy: Interview with Nansen

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Institutions begin to buy: Interview with Nansen

Nansen is a blockchain analytics platform and has quickly become one of the largest and most popular data resources in the industry.

The platform is designed to combine on-chain data with an ever-growing database that contains millions of wallet tags. The team surfaces the signals in the blockchain data, takes that information, enriches it, and aggregates it.

Nansen also does data engineering, where they present available information in comprehensive dashboards where cryptocurrency investors can more easily surface actionable insights and draw conclusions.

Last July, during ETHCC 5 in Paris, CryptoPotato had the chance to sit down with Daniel Khou and Elizabeth Yeung of Nansen. Elizabeth is a Senior Attribution Research Analyst and Daniel is a Research Analyst on Nansen’s Alpha team.

We discussed various hot topics such as current market conditions, non-fungible tokens, where the next hype will come from, and some exciting but not-so-known details of the Terra fiasco.

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Track Smart Money to identify trends

Nansen tracks ten different channels – most EVM compatible, but also Solana, Terra, and even has a dedicated dashboard for Ronin – Axie Infinity’s network.

They provide a lot of information about non-fungible tokens (NFT) where users can track top notch NFTs like Crypto Punks, Bored Apes and other lesser-known collections.

Based on the information received, the prices of art-related NFT projects also seem to move in cycles, although sometimes differently compared to Bitcoin or Ethereum.

“I think historically NFTs also sometimes work a little differently than Ethereum or Bitcoin – like the general market. Sometimes, even if the market is not doing so well, they can possibly perform better. In general, looking at our NFT indices provides a good indicator of the market trend for NFTs.

Regarding the possibility of predicting incoming and future trends, according to Khoo, using on-chain data can help track smart money entering and exiting the market.

“Smart money is either investors that have historically been very profitable, or funds and financial institutions that are active on-chain.

More or less, we usually follow this smart money because they are mostly seed investors or private investors, and they usually spot trends early on. This is how we use this data to see what the big funds are looking at and what trends they are also identifying.

“Many large institutions are starting to buy back”

Over the past two months, we have seen many large companies, such as Celsius Network (one of the largest institutional and retail lenders in the industry), as well as Capital of the Three Arrows (3AC – a leading cryptocurrency hedge fund), defaulted due to excessive leverage and poor risk management.

The collapse of the entire Terra ecosystem caught many, including those above, off guard and resulted in catastrophic losses across the board – an event many refer to as “deleveraging.”

According to Nansen, however, there are other factors that are also contributing to the ongoing bear market.

“There was not just the deleveraging of the big players, but also the macroeconomic situation and a general loss of confidence in certain assets as well. All these contagion effects coming from, for example, the collapse of Luna and Terra, play and affect all markets equally.

With so much fear in the market, even funds taking profits and also selling, we can definitely see that prices have come down a lot.

However, on the more positive side, Khoo revealed that “a lot of big institutions are actually starting to buy back, and that could be a good signal.”

Additionally, comparing current market conditions to 2018, institutions appear to be the key differentiators.

“Even now, when prices have come down a lot, we are seeing very strong support from many large institutions who are buying in bulk and holding for the long term.

In 2018, there was perhaps less institutional money, less stablecoin money ready to deploy. I think the main difference is that people have higher purchasing power now and a lot of institutions are able to hold out for long periods of time.

Establishments

The Collapse of Terra: More than one entity caused the attack

The collapse of the Terra ecosystem left the entire cryptocurrency community and perhaps the tech world, in general, impressed. The multi-billion dollar project lost all of its value in less than a week in an event that has never been seen before.

The implications are still being felt to this day as many projects suffer from contagion. One narrative that crept in was that there was a single entity responsible for the attack on the UST algorithmic stablecoin, pushing it under its peg. However, according to on-chain data, Nansen claims that’s not entirely true.

“After digging through the chain data, we discovered that it was not a single entity, but a few wallets that somehow triggered the depeg. We obviously don’t know if they were in cahoots or what their intentions were.

It’s also important to note that their intentions may not have been to intentionally detach the stablecoin “but simply to spin and cause imbalances in the pool when they actually withdraw liquidity.”

“The second shocking thing is that for the stETH staking rebate which is currently trading and also during the period that Celsius had to unwind its leverage positions.

We can see that it all started from the collapse of UST and Terra, which actually caused the discount staking situation, as Terra, Luna and UST were quite a large investment for these entities.

On the bright side, however, we may be done with the contagion effects of the collapse, although the market may not be out of the woods just yet. It has to do with some cryptocurrency exchanges halting withdrawals and transactions.

Nansen doesn’t track off-chain data and describes this as “a bit scary” because they “can’t see what’s going on with their books (read: centralized entities). Certainly there are things going on in behind the scenes that we can’t follow, and this situation may not be completely over, but we’ll never know.

Nansen’s future

Speaking about Nansen’s future, Yeung revealed a lot about Nansen Login – a messaging app that allows users who own a specific NFT to connect with other holders who own it, as well as join chat forums based on wallet tags.

“This is a very exciting feature that we released recently. If you have a specific tag in your name – maybe you’re a smart investor, smart money – you can log in and chat with other people with a similar profile.

Nansen aims to become Web3’s news super app by integrating Layer 1 and Layer 2 blockchains, expanding its coverage and wallet tags.

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