All crypto-assets investors know that analyzing DeFi asset’s performance is challenging. All projects have different usage mechanisms to lock value within their protocol and incentivize usage through complex tokenomics. As DeFi projects are constantly evolving with new ones appearing on a high-frequency basis, it’s hard to keep track of everything which is happening in this space. Unless you have access to a standardized analytic approach to measuring investors’ engagement.
Nyctale’s behavioral footprint as an index of investors' engagement
At Nyctale, we have been looking since our early days for a standardized methodology to measure investment behaviors around crypto-assets and analyze their respective growth. The behavioral footprint of an investor community, in its segmentation and evolution, represents in our mind the best way to measure growth trends and community engagement around a given asset and its associated application.
It enables us to use a standardized methodology to screen every type of asset, highlighting the transactional patterns for every wallet within a community. In this way, we can have a single reading grid for different types of tokens showing how their investor communities are evolving.
We identified 4 major investment modalities to monitor: long-term investors labeled as Holders, Speculators that are either interacting with exchange platforms or smart contracts to generate investment performance, and Incoming or Outgoing investors who are consolidating or decreasing their position. A healthy network requires to have a great equilibrium between these different modalities:
- Too few Holders means investors don’t believe in the long-term value creation potential.
- Too few Speculators means the network isn’t really active in terms of trading and usage.
- Too few Incoming and/or Outgoing investors means the network isn’t really attractive for investment purposes.
In addition, to have a great equilibrium between these investment modalities, it’s also important to have a real distribution in terms of size or intensity for each of these personas:
- Too many big actors mean a highly concentrated network unable to attract small players.
- Too many small players mean key stakeholders avoid interacting with these networks, which is most of the time undesirable.
With these elements in mind, let’s have a look at the +10 DeFi assets we are currently monitoring to identify the best and worst performers for the last few months.
We are using here our weekly average behavior view to characterize the wallets’ activity patterns, with labeling rules explained in our analytic methodology, highlighting the evolution during this 2020 period.
We ordered the covered assets following their behavioral footprint similarities, their effective growth and distribution in terms of investment modalities. This is not investment advice, trade at your own risk!
The growth rates displayed on the screenshot of our interface are the weekly ones, as of early December.
Aave, a perfectly balanced investor footprint
With constant growth in terms of Incoming investors and long-term investors (a steady increase in our Holders category), while having a stable amount of Speculators and Outgoing investors, and well-distributed sub-personas in terms of size or intensity, Aave’s behavioral footprint definitely appears as the most seducing one.
Chainlink, a strong growth fueled by retail investors
LINK is a very popular token on the retail market, being the most well-ranked one in terms of market capitalization. This could explain its popularity among retail investors (Micro sub-persona in the graph), who have kept investing in this network all along the year.
UMA and REN surfing on the DeFi summer hype
These two tokens are sharing a similar behavioral footprint, with a major growth trend having been initiated during the last summer hype, while showing an interesting continuity after the DeFi correction which has happened this autumn.
Yearn.finance, Maker, and Compound on a stable uptrend
Again, we have three similar behavioral footprints with stable growth all along their existence this year. Yearn.finance might be the most equilibrated one, with a less active network for Maker and a much more retail-oriented one for Compound.
Uniswap, 0x, Kyber, Loopring, and Nexus Mutual stagnating
These networks are again sharing some high similarities on the behavioral footprints, with most of their token activity based on long-term investors. The case of Uniswap is slightly specific, as the absence of significant growth is mainly due to their huge initial airdrop, which hasn’t been able to initiate a stable growth. 0x, Loopring, and Kyber all have a strong historical community, but which hasn’t experienced a significant growth all along this year. And Nexus Mutual is looking for a second breath after an interesting development phase during this summer.
Separating the signals from the noise with Nyctale’s tools
With this highly sophisticated but easy-to-understand behavioral modeling approach, it’s clear that we offer a new analyzing grid to look at the development performance of major crypto-assets. Price data is interesting and shows valuable insights, however, disregarding investor behavior - retail and institutional - might lead to bad investment decisions. To get the full picture, monitoring how an asset’s investor community is shaped will give you the edge on investment decisions.
To get more indicators and insights, you can register to our platform and experience our Top DeFi dashboard thanks to our 30-days free trial. We started with the DeFi area as it’s one of the most promising application sectors for now, but we plan to cover all major assets and protocols with time.