The concept of smart money is quite broad. In this article, we will look at the traditional meaning of smart money, its characteristics, the concept of smart money from a blockchain perspective, and the prospects and challenges of smart money and blockchain integration.

Smart Money as Investment Signal

Traditionally, smart money is funds or capital controlled by experienced and well-informed investment professionals. These entities have a strong command of the market and make strategic investment decisions to that effect. Platforms like Nansen are used to utilize various market trends and get insights into where large capital is moving within the crypto ecosystem.

Characteristics of Smart Money as an Investment Signal

Here are the basic characteristics of the traditional smart money:

Bulk Transactions

Smart money investors make bulk and strategic investments in companies due to speculations that they would perform well and yield beautifully.

High Speculation Sense

Smart money investors often invest in businesses and industries that are highly prolific and are expected to have a rise in potential growth.

Insider Buying

Smart money investors are often company executives since they would have enough information on their respective companies. It is also a sign of confidence in the company’s potential prospects.

Fundamental Analysis

Smart money investors often conduct in-depth fundamental analyses to enable them to make smart investment decisions.

Smart Money as Customizable Payment…

Fundamentally, smart money follows the idea of “restricted-use money” which can be used only for what it is specified. This includes casino-issued propriety chips that can only be used for gambling and government-issued food stamps for purchasing food in designated outlets.

Narrowing this down to blockchain, according to Smart Money: Blockchain-based Customizable Payment published by Copenhagen Business School, “smart money is a value exchange instrument that is based on computer protocols which facilitate, verify, or enforce preset conditions for its appropriation as payment, e.g. who may use the money, what products and services can be bought, and where”. Smart money can be used by individuals, societies, governments, organizations, etc to manage the appropriation of money and its use as a customizable medium of exchange.