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With OTC, Whale market, and pre-market platforms like AEVO, the current coin valuations on the rankings are relatively accurate. However, it becomes challenging once you buy and hold.
For example, with tokens like $ARB and $STRK about to unlock a significant amount of tokens, how should one handle it? Is it optimal to sell before the unlock and wait for a price drop to buy back, or should one continue to hold and provide liquidity for the unlocked tokens?
Looking at the chart of Optimism ($OP), tokens are set to unlock for developers and funds in June. If one times it accurately, selling tokens a day before the official unlock can result in selling $OP at a 50% reduced price.
Since information about unlocked tokens is entirely public, logically, if one wants to speculate, it's better to sell tokens before the unlock and then buy back, rather than waiting until the official unlock date to sell. Observing the chart, there is a consolidation area after the unlock, possibly due to funds selling, leading to a price drop. Comparing it to Bitcoin's ($BTC) chart, the consolidation area after the unlock aligns with Bitcoin's consolidation, similar to many other tokens at that time, indicating it's not an isolated case.
Explaining why some funds unlock tokens with a price increase while others see a decrease. One reason is that the prices of alternative tokens follow Bitcoin's ($BTC) trends. Another reason is that funds might have sold the locked tokens earlier.
For instance:
- Fund A bought tokens in the seed round at $0.01/token. The project goes live on Binance at $1, so Fund A makes a profit of 100x. Although they have significant liquidity for selling, unfortunately, Fund A has to wait for a year for the unlock.
- So, Fund A calls Fund B, informing them of the successful project, anticipating a bull market with rising prices, and shares this opportunity with Fund B. Fund A then sells the locked tokens to Fund B at a lower price than the market, like a 75% discount, selling at $0.25/token. Fund A celebrates with a 25x profit, and Fund B holds the tokens, waiting for a year to unlock and sell again.
Interestingly, Fund B might go to Fund C, D, E, etc. Increasing the locked token price from $0.01 to $0.25, then to $0.5, $0.75... This activity often occurs between funds, driving up the purchased token prices. Thus, even after unlocking, there may not be significant selling behavior. Sometimes Fund E may buy at a price close to the market price.
So, the next time you see a fund unlocking tokens and the price rising by 100x, it may not be entirely true. In general, funds, like retail investors, predict 100x from bottom to top, which is easy. But very few can truly hold 100x with substantial trading volume.
Therefore, based on my observation:
- Selling on the day of unlocking is likely to be selling at the bottom. The market tends to buy/sell before the news comes out. This is known as buying the rumor and selling the fact.
- Altcoin prices closely follow Bitcoin, so short-term price fluctuations or sideways trends can be observed in Bitcoin's chart, considering market sentiment. In the long run, if the altcoin is of high quality, the price will rise.
- Internal factors of the project, whether there are reasons to attract the market (story, catalysts, market trends), are crucial. Community buying volume greater than fund selling volume = token price increase. Sometimes, what funds show to the community may be what they want the community to see. So, before every token unlock, I usually check if there are still reasons for the token to continue rising. If there are, I hold until the unlock is over; if not, even if the fund doesn't unlock tokens, I sell. |
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Post time 4-3-2024 20:34:27