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Playing the crypto game

Consideration points for pricing speculation in the crypto markets

Big news doesn’t mean a price moonshot

This information isn’t really relevant to HODLers or professional investors, but if you’re relatively new to the crypto day trading game and like to ride the dips and moonshots, you may find some value here. Especially if you tend to make riskier bets by buying into coins outside of the top 100.

There’s this theory in financial economics called the efficient-market hypothesis. You should read the Wikipedia entry but basically it has to do with the availability of public information about any given asset. The current price usually reflects all of the available information.

The implication about the impossibility of beating the market is probably moot for now because the crypto markets are still in their infancy and thus extremely volatile. Once they mature, this tenet will definitely start proving true.

But for now, I’m not particularly interested about fair values of assets.

When a known announcement, presentation or livestream is scheduled to happen, a lot of new investors (read: gamblers) expect significant price changes. Rarely does this happen even when a mainnet is launched or a sizeable partnership is announced. Why? Because the details of the news don’t matter too much if they match market expectations of the news.

The anticipation of an event will already have been factored into the price as per the efficient-market hypothesis introduced above. Announcing an announcement is the news, the actual announcement serves only as furnishing. Obviously the significance in difference between the news announcement and the news itself can move the price, but it’s unrealistic to expect a double digit jump for a coin launching a mainnet when an annoucement was made months ago about when the mainnet will be launched.

Rumours and pre-announcements are information and have the power to affect asset values.

Playing with penny stock coins

New fiat money will be injected into the markets from both institutional investors and the average Joe and Jill as blockchain concepts become more widely accepted. This is inevitable given the advantages this technology brings. Ceteris paribus of course, a massive depression thanks to global regulation, a snowball decline from a USDT devaluation or any other black swan event could spell the end of healthy crypto markets for years or decades.

It won’t be the end though, the market will almost certainly always recover. The cat’s out the bag now. There’s no benefit in speculating on catastrophizing so let’s get back to taking advantage of asset values in a foreseeably bullish market. Specifically new, unknown, and low marketcap coins.

First thing’s first. Only put in what you can lose. Two, don’t panic sell. Three, always do your own research.

When you research you should have your own set of heuristics to measure the potential value of the coins you’re looking to buy. The obvious things include evaluating the website, reading or at least skimming through the whitepaper, doing due diligence on the github repo and developer team etc.

One to two hours of research doesn’t count as research. That’s just gambling.

One of my personal rules is to seek dissent. You gain absolutely nothing by finding opinions and optimism that matches your own thoughts. All you’ll get is confirmation bias. Only by actively finding weaknesses and having difficult questions can you inch towards certainty that a project is solid and credible.

If every single person online is praising an unheard of coin, chances are they’re shilling for a pump and dump. Communities that disallow or censor dissent are also a massive red flag. Bitcointalk and Reddit are good starting places for doing research.

Good luck.

This is personal opinion and not a guide on investing. Always do your own research. This text is not financial advice.

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