Almost every company that issues its token has a history of its fall. How long this story lasts depends on several factors, many of which can be corrected, except for one: as a rule, no one succeeds in thoroughly getting rid of the sale at the moments of the next unlock of tokens acquired by investors during the presale. For many outside observers, this process may even look like a sign of a scam, but in fact, correction is average and typical for cryptocurrency projects.
Who’s to blame for the sales?
Regardless of the project’s merits, several audiences are interested in acquiring its token: potential users of the product/token, investors, and speculators. The latter is interested in the token’s properties only as much as many ‘Xs’ the token will bring in the next sale. The vast majority of speculators buy tokens to profit from their price growth. As soon as a token is listed on the exchange, they get a chance to sell it. Naturally, the more such people entered the project at the presale stage, the more dramatically the token price fell.
Token price charts for large pending projects: CFG from Centrifuge, CBD from Greenheart, DLTA from Deltha.theta. Sharp price drops are visible after the next unlock of tokens.
Yes, the typical and foremost reason for post-listing crypto assets drop in price is that too many people go for short deals, even with long-term projects. There is good news in this: for a genuinely confident investor, the moments of sales are the best time to get more tokens at the lowest price, sometimes even cheaper than during the presale. And vice versa, there is a category of panic-stricken investors, newbies usually, who, seeing an asset’s sharp drop in the price, try to “recapture” at least some of the money invested and sell their token reserves.
Mechanisms to keep the token price from falling
For avoiding dramatic sell-offs, different strategies are employed. For example, the most long-awaited and announced projects practice a strict selection of investors. For admission to the presale, those wishing to invest fill out a questionnaire, where they indicate how well they know the project, what they know about the cryptocurrency industry as a whole, what their investment experience is, show their social networks, and so on, depending on the imagination of the project team. The purpose of such “face control” is to weed out as many speculators as possible and leave people interested in the project’s development.
The second mechanism to restrain the sale of tokens when their value rises is the particular conditions under which their owners can sell them. Such measures may include locking tokens without the possibility of selling them for several months or encouraging users to place tokens in staking with favorable conditions. In any case, the locking of tokens occurs in such a mode that they are not released simultaneously. Some projects do not allow selling tokens below the presale price. Still, even in this case, developers or other insiders often can sell tokens quickly and in large quantities, which negatively affects the further project’s fate.
How does a token lose its value and gain it back?
The value of a token depends on how much it is able to keep investors from selling off when the price of an asset rises. If investors hold the coin, neglecting small profits and short-term investments, the token can work miracles. Let’s make a short excursion into history. Our hero is Cardano (ADA). When ADA was listed on Bittrex in 2018, the coin cost was $0.09, but in less than 5 minutes, it depreciated to $0.03. Any trader understands what this is about: the price fell because the sell order was more significant than the buy order — in other words, supply exceeded demand.
When the price fell sharply, some coins were still sold at a profit, while others were apparently sold at a loss. As a result, it took the coin long before it returned to its original listing value of $0.009. Many doubted that the coin would do it at all, and yet, today ADA is worth $1.72. Imagine how much investors could earn on it, but only those who continued to hold the coin and even bought it at the bottom were able to do it!
Historical chart of Cardano price movement on CoinMarketCap
Investor willpower: hold the token and get real profits
Although the development team and marketing department can do a lot to strengthen the token and increase its attractiveness, its investors themselves primarily affect the rate of its price growth. The main incentive that keeps them from selling is the interest in the project’s development and the expectation of profit, many times higher than the short x2. Here in the first place, is the quality of the product that the startup will release, its value on the market, and its potential demand. Also important are the properties of the token itself in the ecosystem of the project, its ability to increase in price for internal reasons.
Returning to the issue of refraining from selling tokens in the name of obtaining many times higher profits in the future, we would like to tell investors:
- Never sell a good asset cheaply.
- Remember that thanks to your patience, tomorrow you can turn out to be a millionaire — it is in the crypto market that this principle is maximally obvious. If you believe in an asset, hold on in sell-off periods and, if possible, buy coins from speculators and alarmists at a low cost.
- Think about the long-term, not the short-term benefits.
Volatility is an inherent property of cryptos
The best examples here are classic cryptos — bitcoin and ether. The history of the ups and downs of 2020 is especially revealing. It was the end of the “crypto winter” when the crypto market entered 2020. Bitcoin has already overcome the dominance of bearish sentiment and traded at just above $7000, while the price of Ethereum hovered around $130. Interestingly, the beginning of the year for BTC turned out to be successful for the first time in 8 years: in January 2020, bitcoin rose in price by 20% — the last time before that such an increase was recorded in 2012. Then March burst out when world markets reacted to the pandemic and collapsed — energy, stock, and the crypto market as well. At the moment of the maximum drawdown, Bitcoin was trading at $5,500, and even lower on P2P platforms! Until September, the BTC rate fluctuated, growing and correcting again, after which a sharp rise in the asset’s value began.
All-historical Bitcoin price chart. Now, at the end of 2021, bitcoin is worth $ 55,000.
The expectations of an imminent halving fueled the optimism of crypto investors — the BTC rate traditionally reacts with growth on it. But few could imagine at the beginning of the year that by the end of 2020, the rise of bitcoin would be so powerful that the cryptocurrency would renew its all-time high, again after 2017 approaching $20,000 per coin in December 2020. For twelve months, bitcoin has risen in price almost three times, and this value, in turn, tripled in 2021! Even more stunning was the growth of the ETH rate, which first received a powerful impetus from the development of decentralized services, and towards the fall began a solemn march through the market thanks to the successful steps towards the updated version of the Ethereum 2.0 blockchain. In 2020, ETH quadrupled its price, exceeding $600 at its peak, and now, at the end of 2021, it costs $4300!
If you look at the graph of the rise and fall of ETH for the current 2021, you can see that the asset fell sharply in June and July — it lost more than half of its value in March ($1800 vs. $4000). Moreover, it is interesting that the reason for such a sharp drop was not the internal problem of the Ethereum network itself. ETH fell in price because of the notorious following after the first cryptocurrency — bitcoin was experiencing the same fluctuations after the shocks caused to the market by the expulsion of miners from the PRC and some other adverse events. As you can see from the annual ETH chart, the coin has confidently gone up since the end of summer, and those who managed to buy in the lows made a profit 2.5 times higher than the purchase price.
Ethereum price for the last 12 months
When are profit expectations not met?
And, finally, we will tell you when the value of the token may not grow. In tokenomics, a token’s price directly relates to usage. If you have an MVP (minimum viable product), then great. Before buying, you could probably estimate approximately how helpful the product is and how it will work. If not, then it should be released within a few months. At the stage of creating a product, several obvious difficulties may arise:
- The team may not cope with the promised amount of work.
- The project may get lost.
- A standard option is hacking the token itself.
In all three cases, the investment in the token and the expectations of its success do not justify themselves.
BCP (BitcashPay old) value dropped to zero after the token was hacked.
About us and our WELD token
Weld Money is primarily a product. Our product is in demand — in the long term, everyone will need it since blockchain money is entering society more and more profoundly. If yesterday’s cryptos were purely speculative instruments, then today, they are more and more consistent with the signs of money and spreading in real life. The most frequently used item with a smartphone today is a bank card. They are often used together for contactless payments, and this trend will continue to develop. Our product is based on the team’s experience and agreements with the CIS’s largest banks.
Our WELD token is not just an object for speculation. The secret to the viability of our token is that it can perform many functions. Users pay all internal commissions in the WELD token, get bonuses and cashback, buy individual NFT-design. The token has passed a triple audit from leading European firms that unanimously recognized WELD as resistant to hacking.
We can confidently say: we do not have all three internal factors that contribute to the fall of the token to zero. We will not disappear — Weld Money has the Estonian regulator’s accreditation. Our product is almost ready, and the market is looking forward to it. Our token is safe, and we can proudly assert this after all the checks. Therefore, we would like to tell our investors that a period of decline in the token price is inevitable since we did not select investors in TON’s manner. Those who want to get x2–3 are likely to be found. But we are sure that the potential of our token is vast, so those who continue to hold and buy it out at the bottom are going to win in the future.
We wrote this article to understand that the systematic process of reducing the WELD price is quite natural since every month, we unlock the next batch of tokens. We urge our community and all those who want to join it to have time to buy a token before the product’s release — fasten your seat belts; we’re taking off soon!