Project Wallet Activity Signal: Lessons from the Traditional Equities Market

Updated 2 years ago by Wayne Lam

Today, we’re happy to announce our Project Wallet Activity Signal is officially active for the exclusive list of ERC20 tokens listed here. This signal will alert our staked users when a token transaction greater than $10,000 USD moves out of project related wallets.


The act of trading on undisclosed public information is called 'insider trading' in the traditional equities market and has been heavily regulated since 1909. In a place like crypto where insider trading is not regulated at all, we’ve seen this type of situation run rampant throughout 2017 and 2018 with no repercussions for those who abused their insider knowledge.

To top it off, there’s an even bigger problem in the crypto space because projects aren’t required to disclose their financials either.

This leaves an issue with investors not knowing how the projects are doing financially, amongst other problems that come from a lack of transparency.

Why’s it important to monitor project related transactions?

Traditional Equities

Even in a regulated market, like the traditional equities market, where regulators require insider trading information to be publicly available to everyone, monitoring insider trading plays a role in many seasoned trader’s books.

That’s because insiders are often deep in the trenches and know their company inside out. They know how well the firm is doing and knows best how the future prospect will look.

As the insider is so well informed, we assume insiders would make trades that are most favorable to them, buying and selling when market expectations differ from their own. For example, an insider buying shares would most likely mean he thinks the shares of his company are undervalued, relative to what the market prices them at, and vice versa.

The strategy of monitoring these transactions, despite it being publicly available does work to some extent. As pointed out by Hasan Nejat Seyhun in his book, “Investment Intelligence from Insider Trading”, stock prices tend to rise more when insiders buy back more than they sell. As such, there seems to be value in monitoring insider transactions, even within regulated markets where this information is publicly available to everyone.

Looking at the historical equities market, it may seem like the sole purpose of monitoring insider transactions is clear. However, back when the traditional equities market was less regulated throughout the 20th century, similar to crypto now, it solved a very different problem: accountability.

The lack of regulations and enforcement created an environment where insiders were more likely to commit illegal insider trading solely for their own profits. We won’t go into the details but you can find a detailed timeline of how insider trading has evolved throughout the past century here.

An excerpt from the timeline says the following:

There was a long-held suspicion of insider trading in nearly every major takeover in the 1980s. “It was like free sex,” said the head of one of Wall Street’s largest investment banks. “You definitely saw the abuses growing, but you also saw the absence of people getting caught.”

Crypto Market

In the crypto space, monitoring project related transactions are even more valuable due to how much more unregulated it is compared even to the traditional equities market in the early-mid 20th century.

There is a lack of transparency in not just insider trading but also in the overall financial state of the project. For the retail crypto investor, it is incredibly hard to find data on even the project’s financial health, let alone insider trading.

These are some of the problems that crypto investors currently face:

  1. Even while keeping track of just one project, you may find it difficult to track important events such as employee vesting periods. These events generally have a material impact on the circulating supply and could drastically affect token prices if the employees choose to sell.
  2. When projects are looking to buy back or sell their tokens, they’re not required to disclose this information to investors. A project can in theory dump all their tokens onto an exchange one night without informing you.
  3. Due to the lack of regulations and consequences around insider trading, project founders and employees are more likely to act in their own best self-interest rather than the best interests of the project and its investors. This could be detrimental to outside investors as they may make decisions that could have a negative impact on the project.
  4. Projects aren’t required to disclose their financials. Crypto investors are in the dark when it comes to knowing whether the projects are facing an insolvency risk or not.

Although the effectiveness of monitoring project related wallets may differ depending on how each project stores its funds, monitoring project wallets will most likely solve a few (if not all) of the problems above. Ultimately, the monitoring of project related wallets will give back at least some transparency back to investors.

How do we identify project-related wallets?

We have a team of blockchain experts and machine algorithms that find patterns in project-related wallets. There is no one way of finding project related wallets but we analyze patterns in some of the wallet characteristics below as a basic framework:

  1. The age of the wallet versus the project’s ICO date
  2. Where did the first deposits originate from?
  3. How many different types of tokens does the wallet hold?
  4. How much ETH is the wallet holding?
  5. Was there a period where an “ICO phase” seems to have occurred? (ie. a large number of transactions going to thousands of different addresses in varying amounts over a very small timeframe near the ICO date)
  6. Are there repeated transactions coming in and out from a confirmed project wallet?
  7. Does the token balance make up a very large percentage of the overall token supply? (ie. wallet holds 10% of entire circulating supply)

Again, this is just a basic framework we utilize to find project related wallets, but the actual process takes a lot more effort. Currently, we have project related wallets for almost 50 different ERC20 projects, which you can find here.

Our Project Wallet Activity Signal is now officially active

This signal will alert our staked users when a token transfer greater than $10,000 USD moves out of the project related wallet.

Keep tabs when a project:

  1. Move tokens into exchanges, which may cause downwards price pressure and negative sentiment
  2. Move a large amount of tokens out of their wallets, such as employee vesting periods, which would increase the circulating supply
  3. Move tokens into other project wallets or new exchanges, which may indicate a potential partnership or exchange listing

You can stake for access to our Trading Signals here.

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