A Curious (Common) Pattern of January’s Top Breakout Coins
A few weeks ago, we at Santiment launched a new tool called ‘Top Social Gainers’: every few hours, it calculates the top 10 words with the largest spike in mentions on crypto-specific social media.
As their name suggests, these 10 words recorded the biggest ‘social gains’ compared to the previous 2-week average, making them the top emerging stories in crypto when they appear on our list.
At first, the tool seemed great for picking up on developing stories in the crypto community. For example, when someone kidnapped the wife of one of Norway‘s richest men and asked for $10m in Monero as ransom, this is what our top 10 Social Gainers looked like:
Pretty cool, right? Not only could we see that the news was making waves in the crypto community, we could also see exactly how it rose in prominence throughout the day, as more people and publications picked up on it.
But then, a few days later, something weird started happening to our Top Social Gainers:
All of a sudden, the list was completely overrun by elevated mentions of various mid-cap coins, with barely a few major news items sprinkled in the between. For whatever reason, the crowd’s attention was now almost entirely occupied by these tokens — and upon checking them in our database, we could see why:
Over the next 10 days (January 15th — 25th) we would see more than 20 different coins embarking on a short-term bull run, all of them becoming part of our ‘Top Social Gainers’ list in the process. Random coins were randomly breaking out — and the crowd was loving it.
The big question, of course, was — why? Why so many seemingly arbitrary breakouts in such a short amount of time, and in the middle of a bear market!?
So we decided to dig a little deeper and try to find if there’s anything specific, anything out of place that tied all these breakouts together.
Turns out — there is. And it’s weird.
Bullish Without a Cause
Based on our findings, we decided to split all 20+ breakout coins that made our top 10 list into two distinct categories:
- News-driven breakouts
- Random, seemingly unexplained breakouts, following a shared pattern
Let’s quickly gloss over the first category first:
News-driven breakouts
REP
Augur’s started its bull run on January 13th and would leap 139% over the next 7 days, before slowly cooling off.
Although impressive, Augur’s price action can be seamlessly traced back to the launch of Veil, a peer-to-peer prediction market and derivatives platform built on top of Augur, 0x, and Ethereum.
MTH
Monetha spiked 60.5% from January 14th to January 20th, in relation to its newly-launched decentralized reputation framework which allows users to utilize and transfer reputation capital.
The framework went live on January 17th, right in the middle of its short-lived breakout.
QKC
QKC leapt 40.8% in only 24 hours (January 14th — January 15th), hitting a 2 week-high of $0.048887 before meeting some resistance.
QuarkChain coin’s listing on Upbit, which happened on January 15th, was clearly the primary catalyst for QKC’s rally.
ARN
ARN jumped 69.3% between January 13th and January 17th. It’s mostly trading on Binance, which accounts for 77.96% of the trading volume.
ARN climbed steadily in the 3 days leading up to its Bithumb listing, peaking just as the listing was announced before nosediving shortly thereafter.
BQX / Ethos
BQX/Ethos jumped 179% between January 13th and 18th, maxing out at $0.273955.
The coin climbed to the top of our social list on January 18th, which we often found to be an effective indicator that a top is forming (as the crowd is reaching peak hype).
Ethos published a press release on January 16th about the updates to its Universal Wallet. However, the project didn’t upload the news to its own website until January 18th, when we identified a huge amount of coins moving to an exchange.
We’ve also noticed a spike in our Token Velocity metric when mass media picked up on the news. Spikes in Token Velocity indicate that tokens changed hands more rapidly than usual.
Based on the available data, there’s enough here to assume this was a classic case of “buy the rumor, sell the news.”
Unexplained Breakouts:
Now this is where things get interesting.
Next to all these news-induced bull runs, there was a growing number of coins showing up on our list whose rally just couldn’t be attributed to the 24-hour crypto news cycle.
When it came to these projects, there were no big announcements, no planned releases, nothing. Just the lot of sudden and unexplained bull runs, all following a strange, yet decidedly shared pattern:
DLT
DLT spiked 173% in two days, between January 13th and January 15th. As of this writing, the coin is mostly trading on Binance, which accounts for 77.63% of the trading volume.
DLT’s price increased quite rapidly, as did the social chatter surrounding the coin. When we looked at Agrello’s social media accounts for clues, we quickly realized most people were as surprised about the rally as we were.
Some speculated about a big announcement in regards to legal licensing, or a significant strategic partnership that was soon to be made public. The crowd waited and waited, but no such news came.
In fact, there was only one noteworthy mention of the shorthand DLT that week, and it had nothing to do with Agrello. Instead, it was a story about HSBC’s planned implementation of Distributed Ledger Technology, better known as, well, blockchain.
One theory about DLT’s rally is that some (extremely gullible) people got the impression that the above article was actually about Agrello, sparking the initial pump. If we’re to give humans the benefit of the doubt, though, the news also could’ve confused some prominent trading bots, which might have been on the lookout for increased mentions of ‘DLT’.
Whatever the case, our Daily Active Addresses metric for Agrello spiked on the 15th, meaning that a number of new players just entered the market.
Also, our Token Age Consumed metric showed a lot of coins that were previously dormant changing hands on January 18th, which saw a second, albeit smaller pump of DLT. It looks like some big long-term HODLers decided to take advantage of the increased interest in Argello and sell off their holdings while they still had the chance.
And here’s where things get…odd. There was a very large transaction involving more than 2M DLT coins that occured on January 19th, as recorded in our database:
The coins were first moved from one address to another, before being moved to Binance. After only a couple of minutes, Binance itself transferred those coins from that to another one of their known addresses.
When we went back through DLT’s transaction history in our Dashboards, we found a very similar number of coins sent from that same Binance address the day before.
So as it seems, the coins were initially withdrawn from Binance to a non-exchange address, then moved to a new address after two days, then sent back to the Binance address that originally held those coins, which then transferred DLT to another Binance address.
The notably weird token movement was made even more interesting by the fact that over ¾ of DLT’s volume is being traded on — yep — Binance.
More on this in just a moment. First, let’s take a look at a few other, similar examples:
TNT
TNT mushroomed by 101% between January 13th and January 16th. Tierion is, similar to DLT, mostly trading on Binance, which accounts for 87.82% of its total trading volume.
As with other coins, we’ve checked the project’s social media to see what their community was saying about the pump. However, we only found more people wondering what prompted the rally.
Looking at our on-chain data for TNT, we saw spikes in Token Age Consumed on January 14th and January 15th. This told us that previously dormant tokens started moving heavily in the days leading up to the pump.
On January 15th, a large amount of tokens entered the exchange through various bounces.
As you can see, the pattern is eerily similar to what we saw with DLT. Binance was once again bouncing the coins around several addresses for some unknown reason.
GTO
GTO went up by 70% from January 13th to January 16th. The coin is mostly trading on Kryptono, which accounts for 32.76% of the trading volume.
As the pump attracted new traders, we saw large spikes in our Daily Active Addresses metric, which correlated squarely with the coin’s price action. When traders stopped coming in, GTO‘s price began correcting itself.
We also saw a spike in Token Age Consumed near the local top, indicating once again that long term holders used the pump to liquidate some of their holdings.
Here’s a snippet of GTO tokens coming into exchanges between January 13th and January 17th:
For a third time in a row, we’re seeing the same thing happening, as Binance keeps bouncing these breakout coins between different addresses.
VIBE
VIBE improved by 135% in just a couple of days, from January 13th to January 15th. The coin is mostly trading on Binance, which accounts for 88.16% of its trading volume.
No notable announcements were made at the time, and even though our Dev Activity metric for VIBE was slightly increased, the project didn’t reveal any new features or partnerships.
However, as with previous pumps, we again saw a similar pattern of a large number of coins moving in and out of Binance on January 15th.
Our Token Age Consumed metric also showed a large number of coins that haven’t moved in a while changing wallets on January 15th.
This is probably long term holders taking advantage of the price spike to liquidate some of their holdings. Perhaps with the help of Binance. Or, maybe Binance is one of the long term holders that is looking to liquidate some of its altcoin holdings in order to fund new ventures.
OAX
OAX jumped 170% in seven days between January 13th and January 20th. The coin is mostly trading on Binance, which accounts for 88.89% of the trading volume.
Oax’s rally actually fits both of our categories. It climbed steadily for the first few days of the rally before an almost vertical spike on January 18th, right as the project announced that it will participate in the IFX EXPO Asia event.
Although long-term holders didn’t react much to the bull run, we again noticed the same pattern occur: coins being sent from one address to another first, before being sent to Binance, which then forwarded the coins to a second address. This happened two times with OAX — on January 21st and 22nd. The first and the second batch of coins all ended up on the same Binance address:
Last week’s positive price performance of OAX was probably boosted by the IFX EXPO Asia announcement, but the Binance transactions still look strange. Almost 90% of the coin’s volume goes through Binance, so the exchange can clearly have a strong influence on the coin’s price.
POWR
POWR went up by 81% between January 14th and January 20th. Power Ledger’s coin is mostly trading on Bithumb, which currently accounts for 42.64% of the trading volume.
As with other entries on our list, we saw an influx of new market participants turning to POWR throughout its rally, as indicated by the steady rise of our Daily Active Addresses metric. The Token Age Consumed metric also showed us that a significant number of coins changed wallets and that some hodlers used the price increase as an opportunity to exit the market.
However, when we look at the largest transactions on the POWR blockchain, we see a different situation from the rest of the observed coins.
On January 17th and January 18th, more than 50 million POWR tokens moved in just four transactions. Each of these transactions was a withdrawal from Binance to a private address. There was no bouncing of coins in either case.
This is a pretty clear-cut signal that someone was accumulating a lot of POWR. However, what’s noteworthy here is that we didn’t see any of the strange coin circulation that plagued other entries.
Could this be because Binance is not the leading exchange for POWR? Again, unlike most of the other coins, the majority of POWR’s trading volume actually comes from Bithumb.
Pick Your Poison
There were other breakout coins that made our Social Gainers list in the past few weeks, but the two patterns are pretty clear:
Some breakouts were evidently prompted by big project announcements or newsworthy feature releases. However, this only applies to a select few coins. The rest seemed like random pumps that could hardly be justified by examining the development side of the project.
All random pump coins that we looked at — with the exception of POWR — are mostly traded on Binance. During their rallies, those coins exhibited the same pattern — large transactions bouncing from address to address, with the transfers usually beginning and/or ending with Binance.
So what does this mean? Well, there are several theories that we think could explain this erratic token movement:
1. It could be that the private addresses involved in these bounces are insofar unidentified Binance wallets (cold wallets?), and that this is Binance doing some scheduled housekeeping. That said, it’s worth mentioning that we have one of the biggest databases of exchange wallets in crypto, and have so far identified over 200 different exchange wallets. Also, while some of the wallets mentioned exhibit exchange-like behavior, there’s also sufficient reason to think otherwise.
2. Most of the wallets involved in these transactions are super deep — worth anywhere from $20 million to $140 million. If these are not in fact owned by Binance, they belong to some seriously affluent whales. If that’s the case, what exactly are they up to? And why these coins? At this point, we can only guess.
3. Finally — there’s another theory that we think at least warrants a mention. Since every coin saw spikes in the Token Age Consumed metric, we can conclude that some hodlers used the increased interest in the coins to sell parts of their portfolio to newcomers. Because Binance was involved in all large transactions in that period, it could be possible that Binance itself is one of those hodlers looking to liquidate some of its coins.
This theory is supported by the fact that the private addresses involved in the bounces were always connected to very affluent wallets, containing tens and even hundreds of million dollars worth of various coins. Wallets which, when considering their size and transaction behavior, are more likely to belong to an exchange than to an individual.
We have no firm evidence for this (that’s what makes it a theory), but perhaps Binance is selling some of the coins it holds in order to fund its business development. For example, in the same week that those coins had a bull-run, Binance launched its GBP pairing feature. Again, this is pure speculation, but it does at least seems plausible, considering all the facts. What do you think?
Originally published at santiment.net on February 1, 2019.
