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February 15, 2024, 10:26:32 AM |
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Investors often debate whether it's better to buy tokens that are about to unlock or ones that have already unlocked. Some argue for the potential pump in newly unlocked coins due to reduced selling pressure, while others caution against buying tokens with a high inflation risk. Let's analyze this dilemma through a few case studies.
1/ Case Study: SRM - High Inflation Risk (Low Unlock Percentage):
Investing in tokens with a low unlock percentage can be risky. For instance, Serum (SRM) saw a significant increase in price when only 1% of its total supply was unlocked. However, as the circulating supply increased, the token's value dropped substantially during a downtrend. This highlights the importance of considering both the project's market capitalization and circulating supply.
2/ Case Study: SOL - High Inflation Opportunity (Low Unlock Percentage):
On the other hand, tokens with a low unlock percentage can present opportunities. Solana (SOL) experienced a surge in price before a significant unlock, causing panic selling. However, the price rebounded dramatically, showcasing the potential for substantial profits.
3/ Risk with Low Inflation Tokens (Nearly Fully Unlocked):
When a token is almost fully unlocked, teams, investors, and community members may sell, leading to a lack of upward price momentum. The community may hope for a pump, but in reality, the project might be inactive, potentially resulting in a soft rug pull. It's crucial to stay vigilant and assess a project's activity through its social media and website updates.
4/ Case Study: INJ - Low Inflation Opportunity (Nearly Fully Unlocked):
Injective (INJ) presents a unique case with 88% of its total supply already unlocked. Despite experiencing significant price fluctuations during both uptrends and downtrends, INJ managed to secure additional funding from Jump Crypto and BH Digital in 2022. This further propelled its price, demonstrating that even nearly fully unlocked tokens can offer substantial growth.
5/ So, Which Token to Buy?
Reflecting on the case studies, it becomes evident that the decision between old and new coins, or highly unlocked and nearly unlocked tokens, isn't crucial. Both types have the potential for growth. The key considerations should revolve around the project's development momentum, its ability to adapt to market trends, and the distribution of circulating supply among stakeholders.
6/ Project Development Momentum:
Investors should analyze if a project is actively updating information, aligning with current market trends, and attracting investment compared to its competitors. For older coins, observing their ability to innovate and stay relevant is crucial, while newer projects must align with current market trends.
7/ Who Benefits When the Token Price Rises?
Understanding the circulating supply, inflation ratio, and the distribution of tokens among stakeholders is essential. Additionally, recognizing the actual circulating supply outside of tokenomics can provide insights into who stands to gain the most during a price pump.
8/ Altcoin Investments and Bitcoin:
Considering Bitcoin's impact on the overall market is vital, as Altcoins often respond differently to BTC movements. Investors should be cautious during FOMO phases, as Altcoins may experience sideways movement or significant drops when Bitcoin sees intense price fluctuations. Combining technical analysis and on-chain data helps identify optimal entry points and mitigate risks associated with market fluctuations.
In the complex world of cryptocurrency investments, the key lies in understanding the project's fundamentals, evaluating its development momentum, and gauging the potential benefits for various stakeholders during price increases. By staying informed and considering both market trends and tokenomics, investors can make more informed decisions, ultimately navigating the unlock token paradox more effectively.
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