How onchain analysis works, with the Arkham Intelligence CEO

Transcript

you could reason that the less of a price you have to pay for a Bitcoin if you believe in the Bitcoin pieces the more you should invest uh whereas what actually ends up happening is that the more it goes up uh the more people want to pile on and the more it goes down people actually believe it's over um and so what that tells me is this Market is not being driven by you know fundamentals it's actually being driven by you know the psychology of the people GM good morning welcome to the milroad show The Daily crypto show that's like finding the perfect avocado at the grocery store rare and oh so satisfying I'm your host Jay Hamilton and today we're talking about how onchain analysis can give investors an Inside Edge and

here to join us is archam intelligence founder and CEO Miguel Morel Miguel welcome to the show nice to meet you thank you for having me super excited to have you Morel for for those who don't know Arkham and if you're listening to this and you're investing on you probably should know Arkham the milro pro team knows Arkham this is a a tool I got to say it feels like CIA to me like if I'm using Arkham I feel like I'm like Luther in Mission Impossible and I have access to all this data that I shouldn't have access but that's the amazing thing about onchain is we have all this data and you can now do market analysis you can look for Alpha you can investigate exploits all these things can be done at Arkham the other thing I

got to say that's really cool about Arkham is it's also a really good way to tell a story in a visual way it allows you to look at onchain stuff which usually comes in you know a table a typical spreadsheet and it's kind of you know it's confusing you can't really take much from it well Arkham allows you to do it in a visual way which is really cool it's kind of nerdy visual stuff I would say which everybody listening to this show will definitely love and the final thing I got to say about Arkham is Arkham is also has their own token a km which has a $330 million mark market cap so a very respected project in the space so super exciting to have you on today Miguel Miguel let's start off with when

you yourself are using Arkham or a user is you using Arkham the big thing that everyone's looking for as an investor is looking for that edge looking for that Alpha if you give us the the inside scoop the pull back the hood for us here what are you noticing from your seat from looking at the data on Arkham I think Arkham in particular is really interesting because we give people the ability to see information that they literally could not find anywhere else and so when you're using Arkham intelligence and you're looking at the information on our platform you're looking at information that in and of itself is is is Alpha because there's no other you know participants in in the

market um you know taking into consideration those who who don't use Arkham who would be seeing the same information as you and so by definition you have information that is above and beyond what the rest of the market has when you're using the platform in terms of the actual trends that I'm seeing with respect to the things that have gone viral and what people are looking at when when they're analyzing different things on Arkham I think the number one thing by far recently has been large transfers from things like government entities by far over the past two weeks all of the traffic that we have gotten to to Arkham all of the growth in that traffic has come from people analyzing

the cryptocurrencies of different governments for example the German government being the most famous one uh and what sort of onchain movements these governments have have have been making and what the you know prospective impact to the market would actually be uh and so in terms of Trends I would say that's one of the largest ones um the new kind of analysis of government wallets whereas before this wasn't possible Arkham it was not mainstream to look at what governments were doing with their cryptocurrency um and now and now it is right and we have many different governments on the Arkham platform from the US UK Germany China that people can just go on in and begin monitoring from day one and so I would say that's

probably the largest Trend that that I have noticed from the onchain analytics perspective this cycle which people being much more careful about analyzing who the big players are with with major holding and and when they begin selling your TR yeah I feel like everybody if you're on crypto Twitter in the past month you have seen the Arkham German government dashboard like everybody's seen it you're looking at it on a regular basis until it got to zero because we were all just tracking because obviously we are when we know that there's going to be a large player that's going to impact Supply and they're going to offload 50 billion dollars worth of bitcoin the question is okay when are they doing it how fast are they doing it is it going to impact the

market is it going to impact the price of Bitcoin shout out to bitcoin for swallowing that one up pretty well and it's done it's over German government doesn't own anym everybody so we're in the clear but then we have Mount gaw there's another that I know that you guys have been following huge sh yeah yeah there's another one and it's you know Silk Road in the US government and there's going to be this will will continue to be the case the other thing that's really cool that is that I see a lot in Arkham is so recently there was the wizer X hat that just happened was that like yesterday and 230 million in crypto exploited off that Exchange and where do you go well you go to Arkham to see okay a there was a bounty I know put up on Arkham pretty quickly to try to

figure out what happened here and I think it was Zack xbt shout out to Zach for solving that one incredible how fast he works and and then you could see hey this is where the hack hacker took the funds we can now see that hacker is sold out so we know that you know for better for worse that's over but that is the other thing that's amazing that Arkham allows is that ability to see exploits to see rug Poes to see all the like shitty stuff which I think is the reason you started Arkham in the first place that's right yeah that's 100% right and with respect to you know how you were describing the way you were feeling it actually you know makes me very happy to hear this because when we initially created Arkham my vision was to give people a back computer for crypto and so

if when you're sitting down and doing all this research you know that that that's the feeling that it inspired it means that we succeeded in our vision okay so it wasn't Luther for Mission possible it was Bruce Wayne sitting down in the Batcave okay cool I'll get the analogy I'll get the analogy right next time okay when we look when we zoom out we're in a bll cycle right now I want to get your take on where you think we are in the cycle in a second but first the thing and I actually heard you say this in a recent in interview I believe you're in Paris and you talked about how cycle are now based on chains and the way liquidity is now moving between chains is affecting the price action

that we're seeing within a cycle in past Cycles we only really had Bitcoin and ethereum we didn't really have much else now we have a lot of chains a lot of l1's a lot of l2s and we're seeing liquidity flow the big thing we all need to know is the question we always ask is where where is the activity what is the onchain activity where where are there more wallets where is there more transfers where is there more liquidity because you can bet wherever the activity is there's going to be positive price action as results from that is there any chains that you're noticing that have momentum right now in in either direction either up or down yeah I think uh as a whole the number one thing that been seen recently is

obviously you know things pulling back to to bitcoin all eyes have been on bitcoin recently compared to other ones had a little bit of of a kind of salana season you know not too not too long ago but that seems to have lost a significant amount of of traction compared to where the fervor and fever pitch that we reached a couple of months ago um you know that being said I think that all of these different asset classes and in particular the chains they have communities that develop around them and create narratives about why their particular Community is going to succeed and and the other ones aren't right and so as you know things happen in the market you always get new news about a given Gene that is succeeding or

another Gene that's doing poorly um and right now because so many alts have been bleeding and have gotten absolutely crushed even over the past let's say 60 days compared to compared to bitcoin which has remained you know relatively flat obviously there's been volatility but I think as of today we're at like something like 65,000 or so and so you know it's been relatively flat for the past couple couple of past couple of months um and so as a whole I would say right now people have been focusing on bitcoin focusing a little bit on ethereum um but I haven't really seen too much activity or or news with respect to with respect to the other chains and so I think that you know we'll probably end up getting more

people coming into these chains as they begin chasing more returns once things start going up again in those networks uh but for now we're not really seeing very much the other thing I've heard you say is how reflexive crypto is when things are going up they tend to go up for a project when things are going down it can be tough to change switch that momentum back into the positive is that something that you noticed from using how did you come about that understanding I think that is just a bit of a financial analysis of mine you know not advice but you know my own kind of read on how these Financial Market Mar work you know as a whole when trying to

understand you know price action which you know even though I'm not necessarily a Trader or a large investor in crypto you can't help if you're building in the industry um but pay attention to price action you know it's one of these things that people are constantly talking about and very interested and so there's kind of no escaping understanding what you what's going on with the price and so you end up sort of detecting patterns and and noticing patterns and and cycles and you know drawing analogies and so forth and so I think for for me the most important thing with respect to reflexivity is just the fact that the amount of volatility in crypto I think can't just be explained by you know normal market dynamics I think there's

definitely a more psychological component to crypto that doesn't necessarily exist in in in other financial markets right so for example with other kinds of Commodities like say gold or or silver you know these are mostly driven by Supply economics right and demand economics it's mostly driven by you know the amount of this asset that comes out of the ground and is and is being sold stocks for example you know they have a lot of financial information uh that tends to really affect price you know the revenues the operating costs of the business these sorts of things and you know that tends to be a primary driver um but my understanding of of of cryptocurrency what I've noticed is that cryptocurrency is mostly driven by you know Market me

psychology and sentiment and therefore you know reflexivity because these things tend to be you know kind of when you get one type of it you you end up sort of spreading it to other people right and that's why we get these you know massive boom and busts uh within crypto because as things are going up people believe that the currency is more appealing and as it goes down people believe that it's less appealing however you know with other sorts of asset classes that may not even necessarily be true right because sort of very intuitively you could reason that the less of a price you have to pay for a Bitcoin if you believe in the Bitcoin thesis the more you should invest uh whereas what actually ends up happening

is that the more it goes up the more people want to pile on and the more it goes down people actually believe it's over and so what that tells me is that these mark this Market is not being driven by you know fundamentals it's actually being driven by you know the psychology of the people and the the feel that they receive when they see the price going up versus going down that is a a great take I have not heard that take so eloquently put uh very well said when you zoom out and look at this cycle where do you think we are in this cycle cycle the bull cycle started ended Q4 2023 q1 2024 we're about six months in which your perspective on where we at

and what we can expect moving forward I you know I think this stuff is always really difficult to to predict and you can kind of lock yourself in by by making any concrete conclusions on on the future which you know it's it's impossible to really say but if I had to kind of make a make some sort of analysis of where where we are in the market and where it's headed I would say that every other cycle that I've been in has been something like 12 to 18 months long and broadly speaking you get this kind of initial Rush from the previous lows to all-time high and then a pull back right I I I strongly remember you

know in in in 2021 and in in 2020 you know for example November of 2020 I remember we touched alltime high for Bitcoin again uh and then we had this kind of what at the time felt like a crazy pullback from I think it was like 19,500 down to 16,000 something you know really not the end of the world but everybody was kind of petrified because freaking out yeah all the alts were getting slammed as well and then once we passed that around New Year's if I remember correctly it was kind of around that Christmas New Year's uh sort of time early January obviously everybody started piling back on and then it ran from 20K all the way up to to to 60,000 and now we've had a very similar kind of

echo of this situation where obviously post November 2021 all-time high we fell down to a low of I think probably 16,000 again around the FTX crisis um we ran it all the way back up to previous all-time highs and then we kind of pulled back a little bit to low 50s and so it echoes really similarly to to previous cycles and while no one has the power to say for sure I wouldn't be surprised if we saw new highs again I completely agree one of the things that is really interesting about onchain data tools is and onchain financial markets is that they are always open in our existing

financial markets there's a lag for investors right quarterly reports come out every 90 days investment decisions are made based on old data a lot of the time whereas onine financial markets don't have this problem what's the impact that you see of having real-time data in financial markets markets will tend to Trend towards efficiency markets want to become significant L more efficient and the sort of primary reason for this is that market participants get paid for bringing efficiency to the market right if you have two different venues that have the same asset but they're at dramatically diff different prices then there is a natural market

incentive to go and ARB the two the two assets across the two venues until they reach a equilibrium point whereby there's no longer an Arbitrage to to be fulfilled and so the markets they tend to want to move towards sort of an efficiency or a or an equilibrium and so what this means is that with blockchains in particular you have access to information about an asset and in particular about the market supply and demand of a given asset without needing to wait for a company to put the information out um so in things like stocks for example you know when you're dealing with large corporations you you have to wait for the company or the

SEC or some other kind of centralized body to release information that before that point was material non-public information and then you only get it during you know let's say like the earnings reports or something like this whereas with crypto you actually have the ability to access that information in real time um and so as more information about a business is created throughout the normal work and nature you know activity of that of that business over the 90 days before the earnings report there's an inefficiency in the market in that things are happening in the business that people don't actually know about yet that will later be ref reflected in the price but it turns out that it's reflected in the price all at once during the earnings

report rather than being ref reflected over time whereas with blockchains you can actually see the number of addresses growing you know on a block byblock basis you can look at the number of transactions you can look at the tbll of a given protocol you can see if it's been hacked you can see you know what the particular you know customers of that of that product are are are doing on the Chain um and so you can you can sort of back of the napkin your way to you know an effective kind of valuation based on this information without needing to wait for the protocol to put out a statement and so I think that having access to that kind of real-time information should in the long run make blockchains a incredibly more useful and efficient way of doing things within

markets than having them on kind of you know centralized data server you mean to tell me that I could get up-to-date information from any ethereum evm based chain every 12 seconds whereas in the public markets I have to wait 90 days like 12 seconds versus 90 days what yeah that's exactly right and I think that this is one of the core kind of value propositions for cryptocurrency and blockchain in general because I feel the same way about that in the data world as I feel in the you know kind of you know Bank world where you know you have to wait three business days for a wi to clear and there's a phone call process and it's incredibly annoying uh whereas with you know cryptocurrency you're able to send it immediately and provide the

person a receipt that you had sent the money to the address that they provided you and so I feel like this sort of theory for for data is just you know the use case of banking but in a different area yeah and it seems so obvious when you say that it's it it always just makes me think what is why why can't everybody just see that we have an incredible use case here that really is going to impact everybody's lives okay last question before we let you go Arkham intelligence offers a few different services and one of the services is the Intel exchange for those who don't know the Intel exchange can you just explain it quickly because it's very interesting product and I would love to know can you pick maybe like a a bounty to give us an example like a a

good story of a bounty that's happened yeah absolutely so I think that overall the Intel exchange is a way by which Aram can get access to information to provide to the broader community that we wouldn't have been able to find elsewhere and so with Arkham in particular we do our job of attempting to find as much information as possible about what's going on in cryptocurrency markets and who the respective owners of different uh wallets are however uh it is the case that our technology and our team isn't able to find you know all information right there are situations where there's a particular person who has a data point or information that we don't necessarily have access to right

and so what the Intel exchange does is it creates a Marketplace whereby people can incentivize one another to provide information in exchange for money um and so this is kind of like a new and novel way of attempting to create what we decided to call kind of liquidity for for information or liquidity for for data and I think that you know this is one of the things that makes Arkham so so novel uh now with respect to you know B Bounty stories and some of the famous ones I would say one of the most famous ones uh is probably one of the identifications of Doan's personal wallets uh from from the Luna collapse um so we had previously um you know put up a put up a

bounty uh for being able to understand more about teral Luna uh the people involved the corporation and you know how the collapse went down essentially um and so within the Intel exchange we then ended up getting a submission for one of Doan's uh actual actual wallets which uh we believe ended up being being correct um and so that was that that's probably one of the one of the cooler stories you can read about it online by just looking up Arkham Intel platform dquan um and and you can read the story but you know at the time this was this was Major news because people were trying to scour and figure out you know where all this money had gone uh from from ter so I think that uh you know it

was very interesting yeah super interesting and something that we've never had the ability to do before now obviously there's a there's a bigger question of uh privacy of data versus publicly sharing data and we don't need to go down that that path today I know that Arkham has a process through which you you authenticate your data to ensure um that a bounty has been properly um upheld uh and that that's a an ongoing process but the the ability to look up these these kinds of data as you said I mean we can't look up the way any of our governments are moving their Fiat money

but they're all moving their Fiat money in ways that might not benefit us very much as citizens of those countries or or our investments but we can certainly look that that up in terms of their onchain data Miguel it's been just a pleasure to have you on the show I really appreciate your time and your insights today great thank you very much it was a pleasure to be on awesome thanks so much for listening everybody have a wicked awesome day thank you for listening to milk Road radio the easiest path to get smarter about crypto if you like this episode share it and hit subscribe or follow so you don't miss out on the next one there's also a link in the description to our free 5minute daily newsletter where we simplify crypto for you well making you laugh and if you're willing to step up your crypto

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