In the crypto market, altcoins are often seen as high-risk, high-reward investment assets. Many traders find that using Bitcoin’s mindset to trade altcoins doesn’t work well. Bitcoin is relatively mature with more controlled volatility, while altcoins come in many varieties and themes, making their prices more susceptible to project news and large investor manipulation. Therefore, we need to establish a correct trading logic for altcoins. This article will guide beginners step by step in creating their own altcoin trading strategy using three mainstream methodologies: fundamental analysis, technical analysis, and smart money address tracking.

Fundamental Analysis: Understanding the Intrinsic Value of Altcoin Projects

Fundamental analysis focuses on evaluating the intrinsic value and long-term potential of a crypto project, including the strength of the team, product technology, tokenomics, and market demand. Compared to Bitcoin, which is mainly influenced by macro factors, altcoins resemble startup stocks, with performance highly dependent on the development of the project and the heat of its ecosystem.

What to focus on in fundamental analysis?

Team and Vision
Understand the background, development experience, and community reputation of the project team. A reliable team and a clear vision can increase the project’s chances of success. Review the official whitepaper and roadmap to confirm the problems the project aims to solve and its future development plans.

Technology and Product Implementation
Evaluate the technological innovation of the project and the current status of its product implementation. For example, check if a DeFi project already has an operational protocol or if a GameFi game has an existing player community. While technological highlights are important, a project that remains at the concept stage without real-world application carries higher risk.

Data Indicators (On-chain Data)
Use on-chain analysis tools to track key performance data for the project, such as daily active addresses, trading volume, and total value locked (TVL). These metrics reflect whether the project is actually being used. For example, if a DeFi platform’s TVL increases, it indicates more funds are being locked into the protocol, suggesting strong fundamentals. Conversely, a decline in usage signals warning signs. Taking the DeFi ecosystem as an example, during the 2022 bear market, the overall DeFi TVL dropped below $50 billion, losing 75% of its peak value, showing a large outflow of capital. In such cases, even if technical indicators show bullish signals, caution is needed.

The DeFi TVL saw a significant decline in 2022 (Source: Glassnode)

Tokenomics
Analyze the token’s supply mechanism and distribution, including total issuance, inflation rate, unlocking schedule, and use cases. A well-designed tokenomics model (such as deflationary mechanisms and clear utility) can help increase the token’s value. On the other hand, if the team holds too high a percentage or the unlocking is concentrated at certain points in time, there may be a risk of selling pressure.

Community and Market Hype
Observe the community engagement and market attention surrounding the project. For example, the number of members and activity in the project’s Twitter or Discord community, as well as media coverage. A highly active community often indicates strong market interest, but one should also be cautious of hype-driven projects that lack real progress.

Fundamental Analysis in Practice

Let’s take Lido Finance as an example and walk through how to use fundamental analysis to determine whether a DeFi project is worth following:

First, by searching for Lido Finance’s background online, you’ll find that it was co-founded in 2020 by Konstantin Lomashuk, Vasiliy Shapovalov, and Jordan Fish, who were core engineers at leading crypto companies such as Parity and ConsenSys. This suggests that the team not only has strong technical expertise but also a deep network and resources within the industry, which reduces the risk of project failure.

In terms of technology and products, Lido’s stETH liquidity staking derivative already supports major chains like Ethereum, Polygon, and Solana, and integrates with over a hundred DeFi protocols. This indicates that the product is highly mature with rich use cases and a strong competitive edge in the ecosystem.

Next, looking at the tokenomics, LDO has a total supply of 1 billion tokens, with 36.32% allocated to the DAO treasury, 22.18% to investors, and 15% to the founding team. You can use Token Terminal’s Top Tokenholders Dashboard to check LDO’s token concentration in real-time:

1. Open Token Terminal → Projects → Search for “Lido Finance” → Click on “Datasets” → Click on “Top tokenholders”
2. In the “Ownership” column, you can see the percentage of LDO supply controlled by each address.

This data is updated daily, and it shows that the top 100 holders control 84% of the LDO supply, indicating high concentration. A high concentration of token ownership means that governance power could be controlled by a few holders, bringing centralization risks. It’s crucial to closely monitor the project’s future lock-up and unlocking schedules.

Query the holdings distribution of the top tokenholders (Source: Token Terminal)

In terms of market hype, according to Token Terminal → Metrics data, Lido’s Monthly Active Users (MAU) surpassed 25,000 in May 2024 but quickly dropped, currently standing at around 11,100. This significant fluctuation indicates that Lido’s popularity has not been sustained, showing issues with user retention and declining community engagement. It’s important to monitor how the project addresses and enhances long-term usage value and participation.

Lido’s monthly active users decline (Source: Token Terminal)

You can also use Token Terminal → Metrics to check Lido’s Total Value Locked (TVL). Lido’s TVL has been continuously declining since the end of 2024, dropping from nearly $40 billion to around $18 billion. This indicates a large amount of capital is leaving the protocol, user participation is decreasing, and market confidence is wavering. It’s important to be cautious of potential fundamental weaknesses and the risk of competitors eroding its position.

Lido’s TVL has been continuously declining since the end of 2024 (Source: Token Terminal)

Overall, Lido’s fundamentals still have enough strength to support the project, but several key indicators have weakened recently. It is recommended to adopt a “wait for confirmation” strategy: wait until core metrics such as TVL and MAU stabilize and governance decentralization improves before evaluating the timing for gradual investment.

Through this case, it is evident that fundamental analysis helps us determine whether an altcoin project is “worthwhile.” For beginners, developing a habit of studying a project’s whitepaper and monitoring on-chain data trends is more valuable than blindly following market rumors. Remember: fundamentals are the long-term strength, and prices will ultimately revert to value. Before buying into an altcoin, ask yourself if the project truly has long-term significance. This will increase your chances of success in altcoin investing.

Technical Analysis: Analyzing Chart Trends and Mastering Timing

In addition to fundamental analysis, technical analysis (TA) is an essential tool when trading altcoins. Technical analysis relies on market data such as price and trading volume, using charts to identify trends and patterns that help determine buy and sell opportunities. For volatile altcoins, prices can double within days or drop significantly instantly. Understanding how to read charts can help you go with the trend and make timely decisions for taking profits or cutting losses.

Common Technical Analysis Key Points

Trends and Patterns
Start by determining whether the altcoin is in a bullish or bearish trend. You can observe moving averages (e.g., the 50-day moving average) to assess whether the short-term and long-term trends are in a bullish alignment. Pay attention to classic patterns such as double bottoms, triple tops, triangle convergences, and head-and-shoulder tops/bottoms. For example, if an altcoin’s price forms a triple bottom pattern and breaks above the neckline, it often signals a trend reversal to the upside.

Moving averages above indicate a bullish trend (Source: Gate Learn Creator John)

Support and Resistance
Using candlestick charts, identify key support and resistance levels (zones with dense highs and lows). Due to the high volatility of altcoins, support/resistance levels are often battlegrounds for bulls and bears. A level that repeatedly rebounds is a strong support, while a price that repeatedly fails to break through and falls back suggests strong resistance. When the price breaks through a resistance zone, it often leads to a support/resistance flip, where the previous resistance becomes support. When entering a trade, buying near the support zone is generally safer.

Support and Resistance Zones (Source: Gate Learn Creator John)

Technical Indicators
Auxiliary indicators such as RSI (Relative Strength Index), MACD, and Bollinger Bands can provide signals for overbought/oversold conditions or momentum changes. For example, an RSI above 70 often indicates overbought conditions (potential price correction), while an RSI below 30 may suggest oversold conditions (higher probability of a rebound).

However, it is important not to rely solely on indicator values but to combine them with trend analysis. For instance, the overbought/oversold thresholds for RSI can be adjusted to 80 and 40 in a bull market and 60 and 20 in a bear market to prevent excessive or ineffective signals.

Additionally, single-period analysis can often produce false signals, so it is recommended to use a multi-timeframe validation framework. For example, when the 30-period EMA crosses above the 90-period EMA, confirm this by checking that the 4-hour RSI is above 65 and the weekly MACD shows a golden cross. These combined conditions create a reliable bullish entry signal, improving trade success rates and reducing risks. By optimizing strategies this way, traders can more accurately time their trades and avoid being misled by market noise.

Trading Volume
Trading volume is one of the most critical yet often overlooked elements in technical analysis. The trend becomes more convincing when price movements are accompanied by high trading volume. Conversely, price increases or decreases without significant volume are usually unsustainable. When you see an altcoin breaking a key resistance level, always check if the volume has significantly increased. A breakout with strong volume has a higher chance of success. If the volume is insufficient, it may be a false breakout, so be cautious when chasing the price higher.

Technical Analysis in Practice

We can systematically develop a technical trading strategy for altcoins by applying the key points above. Let’s use LDO as an example to illustrate the practical steps. Below is the daily chart of LDO:

LDO Daily Chart (Source: Gate Learn Creator John)

You can open TradingView or use the built-in candlestick chart on an exchange, then extend the time frame to daily or weekly to observe LDO’s overall trend. Currently, the price is in a continuous downtrend and remains below the 50-day moving average, indicating a bearish trend. However, the price now sits at a clear support zone (dotted white line) and shows signs of a rebound without breaking down. At the same time, the RSI indicator is at a low level, suggesting a potential oversold condition. The combined technical indicators indicate an increasing probability of a trend reversal.

Based on this analysis, if you are bullish on the fundamentals and want to go long, you can formulate a trading strategy: enter when the price breaks above the moving average with strong volume, signaling a shift to a bullish trend, and aim for the next target at the previous high or higher. Risk management is equally important—if the price weakens and breaks below the critical support, consider stopping out to prevent further downside risk.

If LDO subsequently breaks out with strong volume, we execute our plan and buy in batches. Over the following days, closely monitor trading volume and market sentiment: if the price rises while volume continues to increase, it suggests a healthy uptrend and the position can be held longer. However, if the price makes new highs while volume declines (divergence between price and volume), it’s a warning sign, and it may be wise to take partial profits at higher levels. Technical analysis is a dynamic process, and we must remain flexible in adapting to market changes.

Applying this principle: In actual trading, each altcoin chart is unique, but the logic of technical analysis remains consistent. For beginners, it’s best to start by analyzing the overall market trend—learning to assess Bitcoin and Ethereum first—since altcoins are often influenced by broader market movements. If the market is in a bearish trend, even the best altcoins may decline alongside it. Conversely, during a bull market, even low-quality projects may see price surges due to capital inflows. However, some altcoins can exhibit independent price action, making using technical analysis to time entries and exits essential. For example, certain popular DeFi tokens might rise even when Bitcoin is consolidating. In such cases, traders need to use candlestick patterns to verify whether buying pressure is genuine and whether key resistance levels have been broken. Ultimately, technical analysis helps determine “when to enter and exit,” but it’s equally important to combine it with fundamental analysis to decide “what to buy.” Integrating both strategies significantly enhances the probability of success.

Risk Management and Position Control

Risk Hedging Mechanism
Given the high volatility of the altcoin market and its susceptibility to price movements in Bitcoin (BTC) and Ethereum (ETH), it is important to establish a systematic quantitative hedging mechanism to reduce the risks associated with overall market declines. For instance, one can use the β coefficient of BTC/ETH for quantitative hedging.

The β coefficient (Beta coefficient) is used to measure an individual asset’s price volatility sensitivity relative to the entire market or a benchmark asset (such as BTC or ETH). The formula for calculating β is as follows:

β Coefficient Formula (Source: Wikipedia)

Where: Ra = Daily return of the altcoin (e.g., daily price change percentage) Rm = Daily return of the benchmark asset, such as BTC or ETH. β > 1 indicates the altcoin is more volatile than BTC or ETH. β ≈ 1 means the altcoin moves in sync with BTC or ETH. β < 1 indicates the altcoin is less volatile than BTC or ETH.

Specific steps for the risk hedging mechanism are as follows:

1. First, calculate the β coefficient of the altcoin relative to BTC/ETH to assess the market sensitivity and volatility level of the altcoin.First, calculate the β coefficient of the altcoin relative to BTC/ETH to assess the market sensitivity and volatility level of the altcoin.
2. If the 30-day β coefficient of the altcoin sector exceeds 1, indicating excessive market volatility, a risk hedging strategy should be activated immediately. For example, allocate around 25% of the position to BTC or ETH inverse perpetual contracts (short positions) to offset potential losses from the altcoin position with profits generated from the inverse contracts during market declines.
3. When the β coefficient returns to normal levels (e.g., below 1), gradually close the inverse contracts and restore normal position allocation.

This β coefficient-based hedging method can systematically manage portfolio risk, reducing potential losses during periods of significant market volatility.

Refined Technical Stop-Loss Rules
A generalized technical stop-loss strategy may reduce operational efficiency. Therefore, it is recommended to refine the stop-loss settings with more precise methods:

1. When the altcoin price falls below a critical support level, use a dynamic stop-loss method (ATR stop-loss). ATR (Average True Range) is a technical indicator used to measure the asset’s price volatility. Unlike standard volatility indicators, ATR does not consider price direction but purely describes the magnitude of price fluctuations, often used to set dynamic stop-loss or assess market risk. Specifically, the stop-loss can be set as 2 times the ATR, allowing the stop-loss point to adjust dynamically based on recent volatility, making it more suitable for the current market conditions.
2. Monitor the market liquidity of the altcoin. If the bid-ask spread expands suddenly beyond 5%, indicating a severe lack of liquidity and reduced market depth, this could lead to significant price volatility. In such cases, an emergency exit strategy should be initiated, swiftly liquidating or substantially reducing the position to avoid large losses caused by market liquidity depletion.

These refined stop-loss and liquidity monitoring strategies can effectively control market risks, preventing significant, irreversible losses due to liquidity shortages or unexpected declines.

Smart Money Address Tracking: Observing Whale Movements to Capture Market Opportunities

Smart money refers to those well-informed, experienced large investors, including whale wallets, prominent investment institutions, and top players who made early moves in a specific sector. Due to the transparent nature of blockchain, any large transfers or trades by an address are recorded on-chain and publicly accessible. By tracking these smart money addresses, we can potentially identify promising projects early, follow market trends to profit, and even receive timely risk warnings.

Why is tracking smart money important?

Smart money typically has access to first-hand information or conducts deep research. Their capital flows may lead the market. For example, when a powerful whale starts accumulating a particular altcoin in large quantities, the price of that coin is usually pushed up in the short term. Retail investors who observe these on-chain activities and follow up in time have the opportunity to profit from this trend. Additionally, tracking smart money helps us learn from their investment strategies and understand whether their positioning aligns with our own logic. Some whales focus on short-term Meme coin speculation, while others hold long-term blue-chip DeFi projects—each with different styles. We can gain insights and improve our trading systems through long-term observation. Of course, if we observe whales significantly transferring out or dumping an asset, it may signal a time to take profits or indicate potential negative news for the project, at which point reducing exposure can help mitigate risk.

Smart Money Tracking Tools

There are several on-chain monitoring tools available today that allow regular investors to easily track the movements of smart money. Below are some of the most popular and useful platforms or tools:

Lookonchain
A platform dedicated to tracking on-chain whale movements, frequently sharing smart money activity cases on social media. It is recommended to follow their posts on platforms like X, where they often reveal information such as “a whale just bought X coin” or “an old wallet transferred a large amount of Y coin to an exchange.”

For example, in February 2025, Lookonchain posted a warning that a mysterious whale withdrew 1.7 million UNI (worth about $15.54 million) from an exchange to a new wallet. This indicated that the whale was accumulating Uniswap (UNI) tokens. As Uniswap is the largest decentralized exchange on Ethereum, its token had gained over 50% in the past year. Such significant moves by smart money are rarely without reason; they may foresee positive developments for Uniswap and have positioned themselves early. This type of information serves as a potential signal for a bullish outlook.

Lookonchain Post Revealing Whale Movement (Source: Lookonchain Official X)

Arkham
An emerging on-chain intelligence platform that emphasizes de-anonymized analysis. Arkham helps users link specific wallet addresses to potential actual holders or institutions (for example, labeling an address as belonging to a particular foundation). With Arkham’s data, it becomes easier to identify which smart money addresses are worth following. The whale UNI withdrawal event mentioned earlier was discovered and shared by Lookonchain through Arkham’s tagged data. Arkham also provides monitoring functions, allowing users to receive notifications when there are significant transfers from tracked addresses, making it convenient for investors to keep track of whale movements in real-time.

Here’s how to use Arkham for tracking:

1.In the homepage search bar, enter the name of the token you want to track (e.g., “UNI”).
2.Scroll down to see a section with the top holders, which are typically addresses of notable institutions/foundations/whales worth monitoring for that token.

UNI Whale Addresses (Source: Arkham)

3.On the side, there is another section showing the asset transfer records for that token. You can filter by specific addresses or large transfers to check for any unusual activity. For example, when filtering a large holder’s address, I found there was no significant movement within the past two years.

Whale Address Asset Transfer Records (Source: Arkham)

4.If you find a particular address important and worth tracking, you can create a watchlist. Simply search for the address on the Arkham homepage, then click on “Create Alert” or “Trace Address” in the top right. However, note that these features require registration to use.

Nansen
Nansen is a popular and comprehensive on-chain analysis platform. One of its core features is the “Smart Money Label,” which categorizes wallet addresses using machine learning and professional team annotations. Nansen tags tens of thousands of wallet addresses, such as those of well-known venture capital funds (VCs), seasoned DeFi whales, arbitrage experts, and early investors. Traders can quickly understand the background and potential investment motivations of wallet owners through these labels.

Nansen Tool Shows Smart Money Participation in Trades (Source: Nansen)

Additionally, Nansen clearly presents the token fund flow status for a particular address, allowing users to see at a glance whether smart money is continuing to invest in a specific token or ecosystem, or if it is starting to pull funds from a particular sector.

Nansen Shows Fund Flow for Specific Address (Source: Nansen)

In altcoin investments, factors such as institutional holding ratios, token unlocking schedules, and whether tokens are transferred to exchanges after unlocking are important elements influencing short-term price fluctuations. For example, when tokens from VCs or early investors are about to be unlocked for a certain project, Nansen can track and tag the institutional addresses to monitor their asset movements. By observing whether these addresses are transferring tokens to exchanges, traders can anticipate if these large holders are preparing to sell for arbitrage. This provides an early warning, allowing traders to take risk-reducing actions, such as reducing positions or adjusting strategies.

Nansen Shows Large Token Transfers to Exchanges (Source: Nansen)

Other Similar Tools
Other on-chain tools include DeBank, which allows users to search any Ethereum address and view its holdings and historical actions. If you know a well-known individual’s wallet address, you can add it to your DeBank watchlist to monitor their latest holdings and earnings. Similarly, Etherscan, a blockchain explorer, is useful for digging deeper into the details of fund transfers. For example, when a token’s price fluctuates, you can use Etherscan to check if there have been any large transactions, track the funds flowing from a wallet to an exchange, and identify if any whales are selling.

Smart Money Tracking Strategy

Whale Sell-Off Warning
In March of this year, the DeFi platform token AUCTION saw a sudden 50% drop in price. According to Lookonchain’s official X, several whale addresses transferred over 1.08 million AUCTION tokens (14% of the circulating supply) to Binance and OKX exchanges before the crash. Such a large concentration of tokens entering exchanges clearly indicated that whales were preparing to sell off, leading to a market price collapse.

If we had been monitoring the wallets of these AUCTION whales, we would have been able to spot the unusually large transfers to exchanges and act quickly to either raise alerts or sell as a hedge. The risk management value of tracking smart money addresses is identifying signals that trends may reverse based on whale actions. Conversely, if we observe whales buying large amounts of an obscure token, it may signal that the token’s fundamentals are about to improve (e.g., a protocol upgrade or new product launch). If regular investors can spot this early and position themselves accordingly, they may enjoy market gains later.

Distinguishing Smart Money’s Purpose
Not all whale actions are worth blindly following. We need to distinguish the purpose behind smart money movements. Some whales prefer long-term investments, such as well-known institutional funds that allocate to top projects and hold long-term. These addresses tend to have fewer frequent actions. Still, their changes in holdings can help gauge market sentiment (e.g., if a leading fund increases its position in a new emerging sector, it suggests confidence in that area).

Others are short-term arbitrage “sniper” wallets that buy large amounts of tokens when a project first launches its liquidity pool, then quickly sell at a significant profit. Tracking these addresses can teach short-term entry and exit techniques, but ordinary investors may struggle to keep up with their pace.

Additionally, some so-called “smart money addresses” may have benefited more from luck, such as early participants who became wealthy through airdrops, rather than making sophisticated decisions. Therefore, it’s important to carefully filter and track only those whales with real strategies and capabilities. Always avoid blindly copying others—smart money provides signals and inspiration, but final buying or selling decisions should be based on your own independent analysis and risk assessment.

By using on-chain tools, we can gain some insight into the movements of market-leading funds, which is a significant advantage in the often-overwhelming world of crypto. However, it is essential to remember that any whale can make mistakes or change direction unexpectedly. While smart money movements should be considered as a reference, never ignore your own fundamental and technical analysis. Only by combining information from multiple sources can we truly stay informed.

Combining Three Methods to Create a Personalized Altcoin Trading Strategy

The altcoin market is constantly changing, and there is no single formula that guarantees success. Fundamental analysis, technical analysis, and smart money tracking each have their strengths and complement one another: fundamental analysis tells us which coins have potential and are worth long-term attention, technical analysis answers when to buy or sell for the lowest risk and highest opportunity, and tracking smart money provides insight into how others are investing, offering early information advantages and risk warnings.

For beginners, the key is to combine these methods effectively. For example, when you discover that a new DeFi project has strong fundamentals, see a breakout in the charts, and notice that multiple whales are entering, these three signals together create a valuable opportunity to pay attention to. The probability of success is much higher than relying on any single signal alone. On the other hand, rushing into a coin based solely on a technical buy signal, without understanding the fundamentals and when whales have already exited, is often a recipe for failure.

Of course, every investor’s personality and preferences are different, and in practice, the reliance on these three methods can vary. Some may excel at researching industry trends and focus most of their energy on fundamental analysis; others may enjoy reading candlestick charts and thrive on the rhythm of technical analysis; advanced players might specialize in on-chain data mining, closely following whale movements. No single strategy fits all, and the most important thing is to learn and practice until you find the strategy combination that works best for you.

As you embark on your altcoin trading journey, try cross-validating fundamental, technical, and smart money information. Ask yourself: What is the long-term value of the project (fundamentals)? Does the current market sentiment and trend align (technical)? Are there any signs that big players are also paying attention (smart money)? After reviewing these factors, your decision will feel more secure.

Finally, a reminder: while pursuing profits, risk management should never be overlooked. No matter how confident you are in a trade, always set stop-loss points and manage your position size. Only by surviving long enough in the market can you seize the next altcoin opportunity that comes your way. Wishing all readers smooth trading in the crypto world and success in finding their path!