Not since Jan. 2022 have the most adept on-chain traders held such a low percentage of their holdings in stablecoins, says the blockchain research firm.
Blockchain research firm Nansen sees rising risk as the most adept crypto traders reduce their holdings of stablecoins
(Valentin Betancur, Unsplash)
Posted January 12, 2024 at 3:03 pm EST.
“Smart money” wallets have been decreasing their proportion of stablecoins, and that’s a sign that traders are in a risk-taking posture.
Blockchain research firm Nansen labels wallets and addresses as smart money when they meet at least one of several metrics of on-chain profitability and intelligence, such as receiving a substantial amount of coins across several airdrops or making more than $100,000 by being a liquidity provider on decentralized exchange Uniswap.
Right now, smart money wallets are allocating less than 9% of their holdings to stablecoins, a type of cryptocurrency that is pegged to a fiat currency such as the U.S. dollar as a means to provide price stability. A year ago — and two months after crypto exchange FTX filed for bankruptcy — stablecoins accounted for about 32% of total smart money holdings.
Smart money’s share of stablecoins as a percentage of total holdings. (Nansen)
The last time smart money’s holding of stablecoins sunk to this level was in Jan. 2022, when BTC was hovering around $42,000 and the total crypto ecosystem’s market capitalization stood at more than $2 trillion. At press time, BTC is priced around $43,700, while the global crypto market capitalization is nearly $1.8 trillion.
“Stablecoin holding is a good macro indicator showing where the mind of the smart money is. When the chart is peaking — for example, when it was in mid-2022 — that was the maximum risk-off state,” said Nansen data engineer Edgar Rootalu Friday morning in a live stream on YouTube.
The economy in mid-2022 was in turmoil, with high inflation, Fed rate hikes and layoffs across the crypto industry. On June 18 of that year, nearly 42% of smart money holdings were in stablecoins.
“As we see starting from 2023 they’ve been slowly increasing their crypto holdings and decreasing their stablecoin holdings so we’re nearing almost big risk-on behavior here,” Rootalu added.
Update (Jan. 12, 3:15 p.m. EST): Added the stablecoin portion of smart money wallets one year ago.
Update (Jan. 12, 3:11 p.m. EST): Added a descriptor for Nansen and defined the left axis of the graph.
