Social Influence on blockchains. FRST can prove it — a16z’s impact on SNX Tokens.
FRST is a blockchain intelligence company that focuses on finding signals using on-chain data by identifying wallets that are more impactful in respect to the market than others. “Follow the money” is a term that FRST takes to heart. This goes beyond just following large transactions. FRST takes on-chain data and integrates external data to each transaction to provide more human-understandable characteristics to each wallet and transaction.
By personifying activity, FRST’s solutions enable our clients — traders, funds, and researchers, to watch and follow a specific wallet’s (or group of wallets) behaviors from when they invest in specific projects, participate in arbitrage or even vote in protocol governance meetings. We strongly believe that these data insights and visualization aides provide timely and actionable insights to our clients — powering improved strategies and increased profitability.
This article discusses our analysis of a16z’s (AKA Andreessen Horowitz) impact on the Synthetix (SNX) token movement.
2019 Influencer Wallets: a16z
Ethereum has a very robust and growing Decentralized Financial (DeFi) ecosystem. At the heart of Ethereum’s DeFi ecosystem is a project called MakerDAO, a decentralized leverage product.
On September 24th, 2018 MakerDAO published a Medium article that stated that a16z (Andreessen Horowitz) purchased 6% of the total circulating supply of the MakerDAO token (MKR). The MKR token has a circulating supply of 1,000,000 tokens. After MakerDAO published this, FRST found 1 wallet that received 60,000 MRK tokens (6% of the MKR supply). Well, that wasn’t too bad. Now we know which wallet is owned by one of the largest VC funds in the world. Let’s just keep our eye on how they manage this wallet.
Lets fast forward to today with our knowledge that this wallet is likely owned by a16z. On October 15th, FRST noticed the a16z wallet accumulated a large amount of a token called Synthetix Network Token (SNX). Synthetix is a zero-sum, high-liquidity market mechanic on Ethereum mainnet. It allows traders exposure to synthetic assets that track the price or the inverse price movement of digital assets and soon traditional equities without needing to own or short the underlying asset.
Within any social network, when an influencer does something their followers notice. FRST decided to analyze how a16z’s accumulation of SNX token impacted price and market volume among other on-chain metrics.
FRST’s analysis of SNX Transaction flow.
Below the visual shows the total number of transactions of SNX token being sent by month. During the month of October, we saw the total transaction count grow by 168% when compared to total transactions in September of 2019. We began to look closer at the token transactions that occurred during the month of October to see if a16z’s accumulation of SNX token had any impact.
We broke down the daily transaction volume of SNX during the month of October. The idea was to see if the event of a16z acquiring SNX had an impact on the total number of transactions after the event.
a16z received their SNX tokens on October 15th. On October 16th, a popular DeFi newsletter mentioned that a16z was accumulating SNX. On October 17th, a 3 standard deviation move in total transaction volume and total distinct wallets transferring SNX was observed. In the graph below we see the total number represented by the blue line. The red line represents the standard deviation moves of total transactions.
It is equally important to see if the transaction growth came from new SNX adopters or existing addresses transacting more frequently. We can observe the influence of a16z on this as well. Prior to a16z accumulating tokens, we saw an average of 60 unique addresses sending SNX daily. After the accumulation, we saw an average of 110 unique addresses sending SNX tokens daily which nearly doubled the daily active users of this token.
a16z’s effect on SNX price
Between October 1st and the 14th, SNX was up 11% (from $0.45 to $.052). Between the 15th and the 30th, SNX was up 45.25% (from $0.50 to $0.74).
What does FRST know about social?
FRST’s founders, engineers, and data scientists were part of a team that was responsible for building the technology that powered one of the world’s biggest social influence platforms. With expertise in social influence, FRST’s team took these principles to public blockchains to understand how certain wallets influence price and other on-chain metrics. FRST builds tools for traders, researchers, and funds to assist them in formulating alpha-generating strategies using these on-chain signals and wallet personifications.
“Blockchain’s open-source nature allows users with the right tools to find information about how important players are participating in the blockchain/crypto ecosystem. FRST provides this toolkit. For us, FRST has made blockchain data easier to use and understand, which has allowed us to unlock interesting insights and trade ideas.” — Brad Koeppen, Head of Business Development and Trading at CMT Digital
Trading on social signals
FRST was founded by Patrick Gorrell and Jonas Frost in 2017. They were in a coffee shop analyzing transaction patterns of wallets that they had identified as “whales”. They noticed that a group of “whale” wallets moving in similar transaction patterns. What Patrick and Jonas were observing was clusters of unrelated wallets purchasing EOS tokens from the EOS token contract and immediately sending them to an exchange. This seemed like a strange pattern so they dug deeper. For 10 days during the EOS crowd-sale (which lasted close to a year and raised over $4 billion dollars) investors could purchase tokens directly from the crowd-sale contract for $6, however, the centralized exchanges were still trading EOS around $12. Patrick and Jonas noticed this pattern and took advantage of this “contract arbitrage”. This trade was the genesis for FRST. Patrick and Jonas looked at what wallets with more influence were doing and tried to understand their intention, figured it out and followed what they did.
Tell Me More about FRST
The FRST platform was built with professional traders, data scientists, and blockchain researchers in mind. Our current customers include major digital asset exchanges, hedge funds with dedicated crypto desks, venture capital funds, audit/compliance/KYC functions within institutions, and university and government research efforts in the blockchain space.
If you are interested in getting in touch with us to learn more, please visit frst.com or email info@frst.com. We are a friendly group of motivated folks, and we are always looking to add more rock stars to our team and community.
