Divided into three types of people
1. Extractors
2. Smart traders
2. Rule breakers
The extractor, as the name suggests, is someone who does not participate in the betting but extracts fees or acts as an intermediary.
- Those who earn commissions from exchanges. Don’t look down on them; it’s normal for big YouTubers and Weibo influencers to earn over one million RMB in commissions a month. Top YouTubers like MoonCarl can earn tens of millions of dollars in commissions a year. Additionally, computer knowledge is very useful in this field; there are professional SEO teams that specialize in keywords for this area. Sometimes when you search for an exchange's name on a search engine, the first search result is their referral link. Such top SEO teams can earn hundreds of thousands to millions a month during a bull market.
- Creating paid communities and acting as information intermediaries. Often, prominent figures will start a paid community after accumulating a certain number of followers. A slightly larger paid community can generate over one million RMB in annual fees. Additionally, these group owners have extra income; for instance, if they discover a certain activity at exchange XXX and share it in the group, many people will register through their link, allowing them to earn referral fees. For example, if I post a 'US stock account opening tutorial' on my Zhihu account, I could estimate that at least 200 people would open accounts through my link. Each referral can earn $100-$1000 in commissions, so you can calculate how much I could make if I were a bit unethical.
Smart traders, most of whom have unique skills or belong to a specialized team.
- Computer faction. Many traders who make a lot of money in this market are programmers with a computer background or institutions with a large number of programmers. The factions evolved from computer technology are varied but can generally be divided into on-chain and CEX factions.
On-chain grabbers: Some people develop programs to batch grab airdrops, participate in events, engage in fair launches, and obtain whitelists. They grab everything that can be assured to have someone else take over and make them money. Many of those who have made it big in the domestic crypto scene started using Fiddler tools to grab wool back in 2016-2017.
On-chain MEV: Profits come from the slippage price difference paid by retail traders. You could say it's a very competitive space, but you can't say it's unprofitable. The largest MEV bots typically earn over a million dollars a month.
On-chain-CEX arbitrage: Many times, speculative funds and market makers prefer to ignite market trends on CEX. A large order can push the price up several points, and when such a significant price difference occurs, arbitrageurs seize the opportunity. They can buy chips on-chain and then hedge on CEX contracts, waiting for the price to return before slowly selling off, completing a risk-free arbitrage.
Statistical arbitrageurs: Many coins in this market have correlations. The underlying principle is that market participants psychologically feel, 'AAA has already risen/fallen, while the similar concept BBB hasn't, so I need to buy BBB.' Statistical arbitrageurs write sophisticated programs to calculate the historical correlations between different coins and will act when deviations reach a certain level.
Market makers: In fact, market makers often hold multiple roles. On one hand, they provide liquidity for buyers and sellers in the market; on the other hand, they also engage in statistical arbitrage, latency arbitrage, and even venture capital. Theoretically, market makers earn from the spread, but they also engage in many other private activities to increase their investment return.
News trading, which is the field I specialize in. Profits come from the lag in information for retail traders and the inability of market makers to act quickly enough to cancel orders. Retail traders often rely on slow news media or word of mouth within communities to get information, and their reaction time to a piece of news often takes several minutes. Therefore, as long as you buy faster than retail traders, there’s profit to be made.
It's too diverse and I don't want to continue writing.
- Comprehensive data faction. The data faction often looks at market IO holding data, large order transaction data, and monitors the address movements of large holders. They seem to have an all-seeing eye in the market, grasping the flow of money faster than ordinary people, essentially making money from information lag.
Rule breakers
- Market manipulators, who are the market makers in the secondary market, accumulate a large amount of small-cap altcoin spot chips in advance, then initiate a rally to inflate prices by over ten times. Once retail investors FOMO in, they slowly offload using TWAP. Retail investors see, 'Wow, this coin has dropped by 50%, I want to catch the bottom,' but in reality, even after a 50% drop, market manipulators are still in profit.
- Token issuance MCN, the market maker in the primary market. When a sudden hot topic arises in the world, such as Musk tweeting, 'My AI is called GROK,' token factories will start to act. They have a fully automated deployment system that can issue tokens with one click, add liquidity, and allocate to their own insider addresses. Then they will create fake trading prosperity using dozens to thousands of addresses while bribing many cooperating KOLs to promote the token. Once enough retail investors are attracted, some will slowly offload, while others will rug pull in one big move.
Why can market manipulators act without restraint? Because many non-Western countries treat cryptocurrencies as commodities, and in many countries' legislation concerning commodities, there is no concept of 'market manipulation.' Just like in China, if you hoard and inflate the price of Rolex watches or sneakers and then resell them, no one will care. Similarly, inflating coin prices and selling them off is also overlooked.