The crypto market sometimes resembles a bullring – and the bulls will clearly have the upper hand in 2024. However, many a matador would have wished for a warning before he was taken on the horns. But how, where and with whom do you actually find the next “big thing”, or, to stay with the metaphor, the next red flag that the cops will pounce on? In other words: How do you get the coveted “Alpha”?
Who or what is “Alpha”?
The term “alpha” has its origins in the financial world and describes the excess return of an investment compared to a benchmark (here: the overall crypto market). However, it is often understood in the sense of “knowledge advantage”. These include, for example, the announcement of partnerships with well-known companies, adjustments to tokenomics – the economic mechanisms of a crypto project – or the early recognition of trends. Basically, the sooner you get this information, the better. In addition to time-critical information, recognizing and classifying new technological developments, use cases and regulatory news is also part of alpha knowledge in the broader sense.
Crypto Alpha on X – a double-edged sword
The short message service X oscillates somewhere between a gold mine and a cesspit when it comes to obtaining alpha. On the one hand, the platform offers direct access to the leadership teams of crypto networks, from Algorand to ZCash. Important updates are shared with the community. This platform can be a rich ground for alpha information if you know where and how to look. However, to separate the shill from the wheat, it is important to approach the information available on X with a critical perspective.
Here are some tips on how to effectively use the X to obtain alpha information and avoid falling victim to manipulation:
- Follow verified and recognized experts: Focus on accounts that have a proven track record and expertise in the crypto industry. Verified accounts and those respected by the community often provide more valuable and reliable information than many self-proclaimed “alpha hunters.”
- Analyze interaction patterns: Watch how other users react to information. A high level of interaction (likes, retweets, comments) from other trustworthy users can be an indicator of the relevance and credibility of the information. However, you should also pay attention to the quality of the interactions here – X is full of bots.
- Use lists and filters: Organize the accounts you follow into lists by topic or trust level to better manage the flow of information. Use tools and filters to hide irrelevant or low-quality content. To do this, use the integrated list and filter functions of X or third-party tools such as TweetDeck, Hootsuite or Buffer.
- Critical evaluation of announcements: Be especially wary of announcements that seem too good to be true. Cross-check each piece of information with other sources before making decisions based on it. Verify the information against the crypto project’s official blog or website to confirm authenticity. Also use blockchain explorers such as Etherscan or BscScan to verify activity related to the announcement.
- Stay cool: Don’t let the fast pace of X scare you. Take the time to thoroughly analyze the credibility of the information and the potential impact on your portfolio.
Over time, you will develop an intuition for which experts actually offer valuable information – and which only have their own portfolio in mind.
“Off-Chain” Networking: Build your own alpha network
Of course, social media is not the only way to get the coveted alpha knowledge. Face-to-face meetings are at least as helpful when it comes to tapping alpha knowledge. There are plenty of opportunities for networking – even for smaller travel budgets. Top events also take place regularly in Germany: from the Frankfurt Crypto Assets Conference to the decentralized Berlin Blockchain Week with its numerous venues and side events. In addition, many crypto communities gather for regular get-togethers and meet-ups – even outside of the big city. A look at event sites with a Web3 focus is valuable here. By regularly attending conferences and meet-ups, you can gradually build your own information network. And the more contacts you make, the more events land on your radar – a positive feedback loop is created.
Fundamental analysis
In addition to direct exchange in the community, crypto analysis platforms such as Glassnode or CoinMetrics useful tools for your own research into alpha knowledge. These websites provide in-depth insights into on-chain data, making it possible to precisely analyze and understand activity on the blockchains. However, you have to keep in mind that these platforms usually only offer basic features in the free version – on the other hand, the advanced features are only useful if you can classify the information correctly.
For those who want to delve deeper into the world of crypto analysis, here are some practical tips:
- Check smart contracts: Blockchain explorers like Etherscan make it possible to check the code and transactions of smart contracts. A high number of transactions can indicate active and healthy usage. In addition, comments and reviews on such platforms often provide valuable insights into the reliability of the contract.
- Conduct network analysis: Tools like Etherflow or Nansen visualize transaction flows between wallets, which can be helpful in identifying patterns or suspicious activity. The visual representation makes it easier to understand complex network relationships.
- Use daily market updates: Some Bitcoin exchanges, including us Bitget, have their own research departments that offer regular market analyzes and daily updates. These can serve as another piece of the puzzle in your broader market research.
- Use sentiment analysis: Services like Lunarcrush analyze and prepare the mood on social media. A positive or negative trend in the community can often anticipate or confirm price movements.
- Develop intuition for gas fees: Websites like ETH Gas Station or GasNow provide current data on gas fees in the Ethereum network. An increase in fees usually indicates increased activity on the network, which in turn can mean market changes.
- Analyze NFT trends: With the help of platforms like NonFungible.com or Rarity.tools, you can track the latest trends and price movements in the NFT market. These insights can be crucial for identifying early emerging NFT collections or artists.
Thanks to Bot: AI-powered DYOR
You don’t have to be a tech prophet to state that artificial intelligence (AI) will also play an increasingly stronger role in the (crypto) market. You can already take advantage of this fact today. AI can help analyze and interpret the massive amounts of data provided by the tools mentioned above. Chatbots like ChatGPT or Bard open up new ways to interpret blockchain data and market trends and develop effective trading strategies based on them.
These AI tools act like personal analysts, helping you navigate the sea of information. You can understand complex data patterns from blockchain analysis, highlight trading volume trends and interpret price movements. By providing this analysis, they help you identify potential investment opportunities and risks before they become apparent.
In addition, AI models can also backtest trading strategies if you have previously fed them with appropriate historical price data.
However, you should always remember that AI tools are just tools. They do not replace the need to conduct your own thorough research (DYOR – Do Your Own Research!) and justify decisions based on a variety of factors. It is also fundamental to know the quality and provenance of the data used in AI tools to avoid misinterpretations.
Conclusion: The path to Alpha is a marathon, not a sprint
The hunt for crypto alpha is comparable to an enduring bullfight, in which not only speed but also strategic skill and foresight are decisive. A profound understanding of market dynamics, coupled with a healthy skepticism towards supposedly “hot tips” on platforms like X, is essential. True alpha comes not from impulsive decisions, but from sound analysis and building a robust network both online and offline. Tools and technologies, especially AI, play a supporting role, but do not replace the need for your own thorough research.
Long-term success in the crypto market requires patience, care and continuous development of your skills. Just as the matador defeats the bull at the right moment, the path to true crypto alpha requires strategic foresight and the courage to patiently wait for the perfect time.
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