A blockchain sleuthing story
Divi is a cryptocurrency project dedicated to lowering every barrier to entry that people have, not just for their own coin, but for the entire market. This goal is in the lifeblood of the project, in every action is takes, every single development they do. While other projects are creating chains to address utility for blockchain, Divi is creating tools to make other chains more assessable, making crypto’s benefits, incomes, and features available to everyone possible.
They were the first to create multi-tier masternodes, the same masternodes that anyone can launch with a single click of a button. They were the first to bring all the income-producing benefits to people who couldn’t run a node, but had a phone and could earn income over SMS and Whatsapp by storing Divi there. They are creating more utility by integrating Divi into games in development such as Siege Worlds. And in doing this they created the best damn crypto community in existence. People from this project now sell coffee, syrup, books, using shopify and wordpress tools created by Divi to make using the coin easier. And they are just getting started. Their novel wallet is coming out in November.
The development and community support of all this lead to a tremendous price rise over the last year from about 0.3 cents to 3.5 cents now.
Who am I?
Quick note about me. I don’t work for the Divi Project, or any of their subsidiaries, in any way. I love the project and it’s amazing community. I learned about blockchain there and have even learned to make some blockchain related stuff with Divi, using their amazing volunteers and community members to teach me. I do volunteer admin some of their telegram communities, but that’s about it. I’m not a trader and none of this is trading advice. You do what you want, you are on your own, even if I think it’s dumb and will say so in this article.
What happened to their price?
A 10x rise for a post-ICO era coin is pretty good, so there isn’t much to complain about. However, this coin recently saw 8 cents, so after a meteoric rise, there has been quite a drop. But why? None of the fundamentals changed.
Obviously, sell pressure outweighs buy pressure, but why?
Inflation: Divi has very high inflation compared to other legitimate projects, it’s currently about 30%. Maybe, like most projects with high inflation, it’s simply time to pay the piper. In fact it’s one of the most common complaints leveled by newcomers to Divi. This idea is demonstrably false. I have a whole article dedicated to the top three complaints about Divi, and high inflation is one of them. Needless to say, Divi inflation isn’t much different than Bitcoin inflation, and masternodes and staking keep Divi off the markets. Divi has also written two articles about this topic.
Development Delays: It’s possible that development delays have lead to a mass exodus, just when price was doing well. COVID has had an impact on the development schedule, like it has on every other aspect of the economy. So maybe, people got tired of waiting, and went on to greener pastures. If so, we would see selling by a lot of people. This article will demonstrsate that this is not the case.
Whale Exit: This is another distinct possibility, but perhaps the most benign. If the inflation was a fundamental problem we would be seeing lots of people fleeing, including whales. Same for fear about development delays or any other fundamentals. But if a whale exits, that means a large concentration of funds is being dispersed amongst the community. Not only does this bring down the price to make it easier to more people to gather more, more people hold those funds. Maybe a whale died, and many fish were born or got bigger.
Bad Actor: Another possiblity is a bad actor. Maybe someone engaged in a pump and dump. Divi is getting on a new exchange soon, maybe they had to give coin to the exchange and then the exchange dumped the price before trading starts. There are a lot of ways a bad actor could affect the price negatively. This article will show that this can’t be the case unless an exchange has held Divi for almost 2 years.
Detective Work Begins…
The first step is really hard, tedious and tempermental. While a community member has put together a decent block explorer and Divi has been listed on Chainz for over a year, these aren’t enough alone to work this out.
Chainz provides a lot of extra tools other than just following transactions (also they have recently borked their vanilla explorer to some degree). They have an experimental feature that tries to group together addresses that are in the same wallet. I have tried to verify this feature a number of times, and while it is not right some of the time, it’s surprisingly accurate most of the time. I do not know their algorithm for doing this, but it is pretty cool.
I entered my bitrue deposit address and go thte page above. So you click on the “7008 addresses” and it takes you to what must be Bitrue’s wallet, at least the public facing one. At the time of this writing, here is what you see.
It looks weird because if this is all there is, that seems awful. It looks like there are no funds on Bitrue. But fear not! Remember, centralized exchanges like Coinbase, Binance and Bitrue don’t record trades on a blockchain. When you trade some crypto, that crypto is not sent from one address to another.
No, when you send funds into an exchange’s public facing wallet, they take the funds and send it to a second (or third or fourth) wallet, and the amount gets credited to your account. Then, as you trade, the values just get added and subtracted from the balances of the relevant accounts, no blockchain used. Thus the funds do not stay in the public facing wallet for very long.
I had been watching the price drop from almost 900 sats to 700, and then down to 600. If it was a general consensus that something was wrong with Divi, I would be expecting to see many smaller transfers of Divi from lots of wallets. Perhaps I might see, lots of transfers of 10,000 Divi to 1M Divi frequently over time. But I did not see this. I saw the Bitrue wallet page change very little from time to time. Furthermore, on Bitrue itself I saw, well let’s call them green traders, putting a ceiling on the price by placing a really large sell order (no one but other whales or groups of determines holders, can break those) that tend to push down the price. Then the owner of those orders would lose patience and dump the order into the buy side order book, dropping the price even further. See what I mean by ‘green’ traders? More on this later.
I had a suspicion that a large holder was exiting. So I waited and kept on watching the Bitrue wallet. Lo and behold, I saw a 7 million Divi transfer into a bitrue address. Holy crap, someone was about to dump the price again.
I grabbed that 7 million Divi transfer and followed it back. I ended up at a Diamond level masternode (10,000,000 Divi) with the address. I know it is a masternode because the 540 rewards are coming in and there is that balance there. Then, I used the wallet guestimator again at Chainz… and
This person had 30 million Divi and throughout August got rid of all of it. There is another way to verify this wallet. Simply go to the address from where I caught the 7M transfer and see where the rest of the funds come from. When you add up all the transfers from addresses into the Bitrue address, you also end up with about 30M Divi. This dumping is one person.
He disassembled diamonds, made platinums, then eventually got rid of all of it.
We can see the influence this one person had on the price at Coin Gecko. Adding the daily volume over the month of August, we find that a total of 206 million Divi were traded over August on Bitrue, 30M of which were his.
So while volume was about 5 million Divi per day in July (this would be about 150 million Divi baseline volume for the month), being 54% of the additional volume creates pretty intense sell pressure for a low liquidity coin considering the price vaulted to 900 sats the month before. Then, as normal in the greed cycles of crypto, this person’s exit caused panic for speculating traders and people who got into the project at higher numbers.
What do we know about this person?
This article is not out to dox anyone, and frankly, I have no idea who that actual person is in real life. It’s easy enough to check Divi telegram channels to see if anyone mentioned any of these addresses, but it’s pointless. What would that accomplish?
However, we do know that the person has been with Divi since the start of the blockchain. We know that he has held many masternodes over time. So it’s safe to say, that this isn’t an attack. It is not tons of people fleeing the project. It’s not even a bunch of whales leaving or an exit scam. It’s simply ONE whale who wanted or needed out.
One lesson from all this that is important to glean, is that your activities on blockchain are NOT private. I am no expert in following transactions, but this was pretty simple. If I wanted to go further, I would try to find mentions of these addresses and connect them to a real person somewhere. It is very hard to maintain privacy by using blockchain in ways that we normally use cash or cash based apps like venmo.
So, why did he leave?
Who knows? There are a lot of reasons people may leave a project. If they were an investor group, maybe they did a cost/benefit analysis and decided its better to [waste their money] buy into the new hotness, DeFi. Maybe it was someone fleecing people who had invested with him by dumping their investment and taking off. Perhaps he just needs to buy a house right now and needed the money. Maybe hospital bills. Maybe putting three kids into college. Can’t know.
But since he was with us for so long, it’s hard to believe there was malice. I think the destruction of the price was due to being green at trading, at worst being inconsiderate.
How to exit a project you care about
In general, the goal is “Win-Win”. By “in general”, I mean this is how you can go through life with the greatest expectations of positive returns, not just financial ones, but social ones also. Just thinking about every action this way, you can strengthen your bonds with other people, keep communities afloat, keep projects alive. Thinking win-win, is better for you, almost always. This is a great example.
When exiting a project, you want to exit with the most profits (or least amount of loss depending on the situation), don’t you? If you care about the project at all, you will also want to leave with the least negative impact. The price of a coin, is important to the project to some degree. There are market cap thresholds that spur investment, and create opportunities that may not have existed before. Single handedly dragging down the price, not only reducing overall income from the sales, it also harms the ability of the project to develop. That is lose-lose, and why would you go for lose-lose? So win-win here is: you get to maximize your money, while the project gets to capitalize on their current gains in market cap. How?
- OTC trades. The easiest way to achieve this is to communicate with the team. Crypto projects leadership are inundated with requests of Over The Counter trades. Some projects actually have people that handle this, especially if they are low liquidity coins (and let’s be honest, other than a top 20 coin, I might even say top 10, they are ALL low liquidity). So it’s likely that a large trade or set of trades could be made, with escrow for safety, by contacting the team. They get to facilitate a large buyer with a large seller without tanking the price, and you get to have all the coins at the same price, usually the current price, instead of killing the price for everyone.
- Using an exchange like an adult. Ok, maybe that’s a little mean. But the goal is to maximize your income from sales, while not tanking the price. If you are going to move all your funds to an exchange, why not take your time and do it right. You aren’t day trading. You are trying to actually exchange, not lose the value of your funds.
I am not a trader and this is not trading advice, but here are my observations of how the owner of these funds demonstrated naivete about how to unload them. The first mistake is creating huge sell walls. When you put up a sell wall, you deter everyone from chipping at it. Why? Because most traders in a low liquidity asset will just look at it and say “Nahhh” because no one person has the funds to over come it. So the wall just sits there, while the price drops.
In fact, smart buyers will attempt to annoy you by nibbling at your large sell order in miniscule chunks until you get annoyed, drop the wall, and dump into the order book. Worse, people put sell orders below your wall, so YOU think the price is getting away from you, so you put the wall even lower. Putting up a sell wall is the tool of someone who wants to buy at a lower price. It is not for someone who wants to maximize income when selling. See what I mean about how naive this person is in regards to selling assets effectively?
Patience, entice people to your price. Sell on multiple exchanges using the volume each has. Smaller chunks more often. Hide your walls with multiple, smaller trigger orders. There are many things you can do to avoid shackling the price to the ground. In the end, you would receive far more money, and the project can continue to excel. Win-Win.
So, where do we stand?
After following the money for some time, I see that this person still has some money on Bitrue for sale (probably those walls I posted above). There are a couple of wallets and all the masternodes are down. I think at the time of this writing there is still 1.4M Divi he needs to sell.
So the good news is two fold. First, he is almost done, and we can get back to people who don’t buy and sell in such a juvenile way. Maybe. At least not people with this much Divi to unload. So that is a relief.
The fundamentals of the coin are not changed. The community is still strong, the wallet is imminent, the fintech integration still happening, the various use cases all going strong. Even while this sell off was going on, the masternode count rose. I expect we can see some of our previous levels soon enough.
The second bit of good news is that Divi is even more decentralized than it was before. 30 million Divi was dispersed to other holders, put into staking wallets and made into more masternodes. All projects have whales, and the whales of Divi have been holding since Day 1, and continue to hold (except this guy). Divi remains more decentralized than most other important coins.
Divi is the chart on the right, it is already less centralized than PIVX, DASH, even Litecoin (I must say, as for coin holders, Bitcoin isn’t looking so bad). There simply aren’t many whales that hold 30+ million. But those that are, are fiercely loyal to the project. They advise, they participate in the social media channels and volunteer their time for various aspects of the project. The fact that one dropped out (and not one of the people I just mentioned as I talk to them, and know who they are), greatly decreases the likelihood that this will happen again.
I have to stress, I am happy that a whale who hasn’t personally engaged in the project, has basically given away his coins to many other people at better than half price. Other than this one guy, and those who followed his path downwards, sell pressure is minimal.
All in all, this guy who is exiting is almost done, the project is still looking great, the community (and its whales) are mostly holding firm, and the growth and opportunities coming along with this project are looking great.
Author’s Note: While I used the term ‘I’ to describe the activities here, the truth is that other people helped tremendously. While no inside information was used (or even needed) to produce this article, I did get a lot of help from people in the Divi community, especially OriZ, Giff, John Seastar and Voice, so my thanks go to them.