The chief editor of Moscow 24 portal's Economics and Consumer Market section Maxim Rubchenko spoke about the current situation on the cryptocurrency market.
The falling trend in the cryptocurrency market has stopped, but hopes for a rapid recovery of value are not justified. Even the end of the celebration of the Chinese New Year, which many crypto investors had been pinning their hopes on, has not yet brought the long-awaited thaw. The exchange rate growth of the vast majority of coins fluctuates around the zero mark, dipping investors into sadness and depression. The trading volumes of Bitcoin today are about three times lower than in December and early January, Ether is down fourfold, and Ripple has slipped 8 to 10 times compared to its January highs.
On classic stock exchanges, this situation is called a thin, or sluggish market. Small investors at this time are advised not to bid, because, in the absence of liquidity and a large number of players, large traders get the opportunity to "sway" the market for their own purposes.
All this is true. But we have to take into account one crucial circumstance, and that is the fact that cryptocurrency exchange rates of are now at the level of the end of November. This means that investors, who bought coins in December and bravely endured the January rate massacre, are eager to quickly recoup their investments and make a profit. Moreover, there are such opportunities even under current conditions as against the background of the general market "drift" some coins are showing growth by tens of percent. If you learn how to calculate such "lucky tickets," you can make good money even on a sluggish market.
Most often, the growth of a particular coin is due to one of three reasons, and they can be news, pumps, or listings. The positive news is the most obvious reason for a price hike. In recent weeks, we have seen a jump in the price of Litecoin after the announcement of its fork, we saw a twofold rise in VeChain rates due to the news of its partnership with DNV GL, and we have even noted a 10% increase in Ripple amid reports that Saudi Arabia's central bank had signed an agreement with the company on the application of its technology.
The main risk that should be taken into account when trading on such news is the possibility of becoming a victim of pumps. Often, speculators publish fictional news in exchange chats to bloat exchange rates of some coins. Therefore, try to find confirmation of the news from the main source, that is the company that issued a specific token. Do not hesitate to ask in that chat about the source of the news. The lack of an answer to such a question is a bad sign, indicating that you are dealing with a pumping scenario. If you are provided with a link to the source of information, do not be too lazy to check it out. You can lose a few minutes of your life on this and lose some of the growth, but you will not become a victim of someone else's game.
The second way to earn on a sluggish market is to become a participant of the pump. But there is a high probability that you will remain in the red. In addition, in the stock market, such a scheme is considered illegal. Recently, the U.S. Commodity Futures Trade Commission (CFTC) decided to fight the "pumpers" on the crypto market, promising a reward for exposing the organizers of such schemes.
The problem is that most pump and dumps are arranged according to a pyramid scheme, where there is a privileged circle of participants, who receive information before all others and earn the bulk of the profits.
The admission of a new coin to trading on the exchange, as a rule, is accompanied by a sharp, short-term increase in its value, even during a sluggish market. If you manage to buy a new coin in the first hours after the start of trading, then there is a high probability that you will be able to resell it in a day or two with a profit of tens and even hundreds of percent.
At the same time, the earlier you enter the project, the more profits you can get. Therefore, it is better to buy tokens even during the ICO and possibly even the pre-ICO. But at the same time, try to choose really worthwhile projects, not stillborn ones.
The problem is that to participate in the pre-ICO and obtain additional bonuses, you need solid starting capital. And you may simply miss the time to participate in an ICO. Even in January, when the market fell like a stone, the most interesting ICOs collected their hard caps in a matter of minutes. For example, the Insurepal project aimed at using blockchain technologies in insurance raised $18 million in just 80 seconds.
In addition, there is a risk of becoming a victim of elementary fraud. For example, the organizers of the LoopX blockchain startup vanished last week with $4.5 million raised through the ICO. Fortunately, now there are many resources like Internet sites and channels on social networks devoted to the analysis of projects. Such sources can turn into additional protection against scammers.
Also, pay attention to the amounts received by the organizers as a result of token pre-sales, as well as to the investors involved. If large funds have entrusted their resources to a project, their analysts had conducted thorough due diligence and decided that the coins there have prospects and the team can be trusted. "Whales" who buy tokens in pre-sales serve as an additional guarantee of reliability of not only the project, but also the opportunity of getting a good profit after listing on the exchange as most of the major investors expect to sell the coins as soon as possible, raising rates artificially in advance.