Is ‘smart money’ that smart? Top 5 DeFi wallets have unrealized losses

In finance, ‘smart money’ typically refers to institutional or professional investors presumed to possess greater market knowledge and resources. However, an intriguing pattern emerges when examining the top holders across major DeFi platforms.

CryptoSlate analyzed the top 5 wallets (excluding funds and exchanges) and the top 5 fund wallets from major DeFi platforms listed on the on-chain data site Cherry Pick. Platforms included Uniswap, Aave, Curve, Balancer, and 1inch.

Risk Tolerance and Diversification.

The data shows that single wallets linked to institutions generally have lower balances than individual wallets. This could indicate several things.

Firstly, institutional investors may be diversifying their portfolios to mitigate risk. Traditional financial wisdom advocates diversification as a hedge against volatility, and it seems this principle may be carrying over into the developing world of DeFi. This is supported by funds having multiple wallets tagged. Secondly, the lower balances could suggest that institutions are still cautiously exploring DeFi, potentially skeptical of its long-term prospects or operational risks.

Here, ‘smart money’ appears to be exercising caution by not putting all their eggs in one basket or limiting their exposure to the DeFi space altogether.

For example, the average balance in Aave for wallets is approximately $11.46 million, while funds hold an average of just $528,635. This stark contrast could imply that institutional investors are diversifying their risks or are perhaps still testing the waters in the DeFi arena.

Increased losses from funds.

Despite these lower balances, funds exhibit higher realized and unrealized losses. Uniswap’s average realized loss for funds is around $470,000, compared to the colossal average loss of $68.6 million for individual wallets.

Staggeringly, the top UNI wallet has over $500 million in unrealized losses, with all but one of the top five…