On-chain liquidity games: Layers of hunting among developers, snipers, and traders

Author: post-goa

Compiled by: Deep Tide TechFlow

Based on my research, here is a brief summary of the roles in on-chain liquidity games.

Developers and Insiders

False utility slow pump or "being exploited":

• These were very popular during the early AI hype, as no one really understood AI at the time, but everyone wanted early exposure.
• They never completed more than 1% of their roadmap, often hyped by Key Opinion Leaders (KOLs).
• The team usually allocates a large supply to themselves at the contract launch, then distributes it before others. These tokens are then hidden in multiple wallets and sold off.
• After the initial pump, they either slowly dump or encounter exploits after a few weeks, quickly running away after accumulating a large market cap (20-100 million).
• Involves gangs that repeatedly release false projects following current hot narratives. These projects are often derived from more successful projects backed by large venture capital.

Programmatic Snipers

Custom Bots:

• Systematic snipers with custom bots targeting multiple ETH projects.
• The bots follow specific parameters based on smart contracts and trading volume.
• The goal is to achieve 10-100x returns on a few projects from many failed or rugged snipes, almost like a form of yield.

Manual Snipers (ETH)

One of the most profitable on-chain traders:

• Search for new contract addresses or obtain contract addresses through insider information.
• Simulate contracts to check their security and determine other potential indicators, or understand the team's background.
• Outbid other snipers when promising contracts launch.
• Buy large supplies in promising on-chain projects or stealth projects that launch without anti-sniping defenses or pre-launch platforms like Fjord.
• Use multiple wallets to snipe to hold large supplies, exceeding 1%.
• In many cases, projects are at the mercy of snipers, who can crash them to zero in the early stages.
• Many snipers game each other after entering projects, hoping for "dumb money" to come in, and sell when the market cap reaches 500k-1 million, leading to project death. This happens daily on the ETH mainnet.
• Combining some fundamental analysis and machine learning, snipers who determine which contracts might yield over 5 million in market cap or more have significantly outperformed others in the past year.
• Most snipers hold tokens for less than a few hours.

On-Chain Data Traders

Tracking the actions of snipers and insiders:

• Track the movements of profitable (highest PNL) wallets.
• Monitor trading volume and holder alerts.
• Typically buy strong projects after snipers sell; or even knowing that snipers hold large supplies, they will buy if the launch is very promising.
• Usually conduct some basic analysis or narrative analysis on newly launched projects.
• Long-term holders.
• As on-chain trading becomes an increasingly growing content segment in the field, and more on-chain services become available for retail use, its popularity has diluted and increased.
• They are the exit liquidity for the above participants.
• These traders often game each other on newly launched projects that ultimately go to zero. It's just a matter of who gets in first.
• Rely on dumb crypto Twitter (CT), Key Opinion Leaders (KOLs), or other later on-chain traders as exit liquidity.

Other Traders

Haven't learned to use Etherscan or how to check basic data metrics of tokens:

• Get information from call groups, Key Opinion Leaders (KOLs), and crypto Twitter (CT).
• Slower traders who tend to buy into hype.
• Believe that cryptocurrencies have utility beyond speculation.
• Lagging behind in narratives.
• May have been in the field for less than a year.
• These traders are likely to have given up on buying new utility projects or meme coins. Or they are slowly starting to learn on-chain trading and gradually upgrading to the above categories.

Summary

On-chain trading is a liquidity game among developers, snipers, on-chain data traders, and others. As liquidity entering the on-chain space decreases, competition among participants becomes more intense, resulting in those at the top of the pyramid reaping most of the rewards.