Unit 2 · Level 2 · Labels & cohorts
When labels lie
Labels are guesses that hardened into UI. Address ownership changes hands, exchanges rotate wallets, one 'entity' turns out to be three, and a fund labeled from a single old transaction may have sold everything years ago. Whole trading narratives have been built on a mislabeled wallet: 'ancient whale dumps!' headlines that turned out to be an exchange doing maintenance. Trust labels the way you trust weather forecasts.
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What you get asked
Why can an address label become wrong over time even if it started correct?
A wallet labeled 'Fund X' in 2021 may have been handed to a custodian, sold, or abandoned since. Labels are snapshots; wallets are alive.
What's the danger of clustering heuristics like 'addresses that spend together share an owner'?
Heuristics break on mixers, shared custody, and clever wallet software. The result is confident-looking labels with invisible error bars.
Match each labeling failure to the false story it creates
Every failure mode manufactures a narrative someone will trade on. The custodian case is the sneakiest: one address, thousands of unrelated owners.
Before trading on a labeled wallet's move, check when the label was made and whether the wallet's recent ___ still matches it.
A 'market maker' that suddenly acts like a long-term holder probably isn't a market maker anymore. Behaviour is the living evidence; the label is old paperwork.
What does honest uncertainty look like for an on-chain analyst?
The fix isn't to abandon labels. Carry the uncertainty through your reasoning and your words. 'Labeled as' is doing honest work in that sentence. 🐜
The rest of this unit
Carefully turning anonymous addresses into funds, foundations and holder tribes.