What Top Traders Do

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I’ll be using this report to source this document. 

I’ve mentioned my favorite stat many times for NFTs which is:  5% of wallets account for 80% of the profit made on secondary sales. Here's another one, 20% of wallets make up 80% of secondary sale activity. Again, this means that those who are moving real money are constantly shifting and making moves within the space.

The following study was done on the 23,000+ OpenSea user addresses that have flipped 10 or more NFTs on the secondary market… This does not include mint flips, solely secondary market movements.

There are five groups of traders. We’ll call Group 1, the most successful group, Chads. They account for 85% of the total profits made from flipping NFTs. Group 5 is the least successful group, having a negative or a flat trading balance. We’ll refer to these traders as Marks because they would likely be targets for scams.

10,000 hours makes you great at something? Well apparently averaging over 100 flips is one of the biggest keys to success. 

What also strikes me as interesting is the discrepancy in numbers between Groups 5 and 4. Group 4 on average traded the least but they likely have a greater return on a few trades. 

This data also supports a prevailing story in NFTs, Money makes more money. If you come in with more money and gamble/trade well then you can keep going and make more money. You can afford to wait through dips where others who are trading on over-exposed positions can't. Moreover, a second data point supports this: 

This data shows that the Chads are buying projects at an average price point of 1.07 ETH (likely testing 1 ETH support or surpassing the 1 ETH threshold). Comparatively, Marks pay the second-highest price of about .71 ETH. 

What becomes even more interesting is the most successful wallets (the top 5%) that see the greatest return have an average price point of 2.2 ETH.

Not only that, but it seems the Chads are very well diversified. They have bought somewhere around 28 unique collections, on average. Marks are poorly diversified in their buying averages for collections with 9 collections. Even still, there’s a sharp drop to group 2 which has only collected 17 collections on average. 

Again, if you couldn’t tell… Group 5, the Marks, are not good at trading. Remember, these are accounts with 10+ flips, an average buy of close to .75 ETH and yet their best flip is negative… this is because, on average, they are not profiting. The next chart gives even more context.

Groups 1-4 are all hitting at about the same rate. Groups 1-4 are hitting profits at these rates, respectively,  72%, 70%, 69%, and 66%. What does this mean? That Group 1 is winning more when it does when compared to others. It also means they are likely picking the better wins. 

Chads will Chad. The margins of ROI are huge in this case. Group 1 is seeing an average return of almost 3x. They don't have data on the length of holds, but I imagine that most successful holds are months long. If you can hold and have a realistic goal for the project and price, you will be successful. 

This isn’t to show how crazy some of the best investors are. Truly, it’s to identify some patterns that the best are following hopefully. This is a lesson in trading. More trading doesn't mean better buys, less trading doesn't mean more profitable. Best of luck trading, and hopefully, you can approach the success of the Chads of Group 1.