In the hunt for that gilt opportunity, investors continue to look for method in the crypto madness
- The dark side of crypto pumps
- Technical indicators: Yay or nay?
- Looking at the biggest risers: Apecoin (APE) and Stepn (GMT)
- How to know which crypto will pump: primal takeaways
How tin can you tell which cryptocurrency is going to leap in value adjacent? Information technology may depend on whose Twitter feeds y’all follow. “Practice you lot want an edit button?” read Elon Musk’s seemingly innocuous tweet on 5 Apr 2022. Just coupled with news of his 9.two% stake in the social media platform, the comment had far-reaching consequences for Musk’s meme token of choice, Dogecoin (DOGE). While it was no comparison to the manifold moonshots witnessed throughout 2021, the token saw a 16% bull run on the day of the Tesla chief’due south Tweet.
The excitement was simply getting started, as Musk proceeded to brand a bid for the whole of Twitter in what was dubbed his “$43bn Tweet” on xiv April. Twitter initially pushed back against the hostile takeover, earlier seemingly coming to an understanding with Musk on 25 April. In one case again, DOGE pumped, this fourth dimension over twenty%.
The events of this timeline are a prime example of how arbitrary, unpredictable factors tin can touch on the altcoin markets, instigating dramatic price pumps and bull runs that tin net investors huge sums in a matter of hours. The caveat being that these windows of opportunity are usually small, every bit evidenced by DOGE’s swift price reversals. But are there whatsoever lucent ways to acquire how to spot if a crypto is about to pump? Can information technology even be done in the first place?
The night side of crypto pumps
Crypto toll pumps can exist the consequence of genuine factors such as commutation listings, product launches and burn schedules. But they are often an indication of illicit marketplace manipulation, made possible by a comparative lack of regulation and accountability in the loonshit.
Pumps are often orchestrated via online forums, with Telegram and Reddit being ii of the near pop platforms. Ross Thompson, an accountancy and finance lecturer at Arden University in Coventry, in the UK, likened these forums to old-school telesales offices “crammed with unscrupulous brokers identifying and cultivating their marks”.
At the more sinister end of the spectrum, “faceless fraudsters spread fake news and bucketloads of hype on social media to provoke investor interest in worthless cryptocurrency,” Arden said.
Yves Renno, head of trading at the cryptocurrency service provider Wirex, as well believes that pumps are non indicative of a healthy marketplace, and “are very difficult to predict.”
Pumps that are not supported by a sufficient central catalyst should be treated with suspicion, he said. Deceptive and unregulated market makers (ie whales) can create “bull taps”, Renno said, which lure buyers into an overpriced market before the market makers dump high volumes of tokens, thus bringing the tokens’ value downwardly to pre-pump levels. This is the classic “pump-and-dump” scam prevalent in the cryptocurrency space.
Generally speaking, “if a price pump is not supported by new textile information, then it would almost likely be happening in the context of a market price manipulation,” Renno said.
Traditional chart studies can help traders spot pump and dumps. Thompson recommends asking yourself: “Why the precipitous hike?”, while you lot should besides be sceptical of “rises that correlate with posts on social media eulogising virtually the coin’southward potential.”
Technical indicators: Yay or nay?
Kunal Sawhney, chief executive of the stock martket news and research company Kalkine Media, is wary of using technical indicators such as moving averages in the aforementioned way that traditional stock traders do. He said: “Market sentiments are likely to affair more factors similar earnings reports or market share.”
Sawhney besides warns investors off cyberbanking on traditional phenomena such as the “Santa Claus rally”, which describes a strong annual rise in the stock market in belatedly December and early January. At that place is sufficient data to support Sawhney’due south viewpoint hither, for while the crypto markets enjoyed sequent Santa Claus rallies in 2019 and 2020, investors were faced with a disappointing Christmas in 2021. Bitcoin and Ethereum both entered sustained, two-month bearish positions from the start of December, while the major stock indexes performed comparatively well (although ascension tensions in Ukraine and U.s.a. inflation fear caused a January reversal).
That is not to say that technical analysis should exist totally overlooked when determining how to predict crypto pumps. Mitesh Shah, founder of the Usa-based cryptocurrency analytics visitor Omnia Markets, uses a combination of indicators including the relative force alphabetize (RSI), simple moving averages (SMAs), moving average convergence divergence (MACD) and bollinger bands (BB) to determine the value of a specific coin.
However, Shah said, technical analysis only tells role of the story. ”One of the biggest indicators of a coin’s movement comes from the market place/investor sentiment, which tin ofttimes be seen across social media,” he said, and “coins that have a cost point at a fraction of ane cent are much harder to analyse.”
Julius de Kempenaer, a senior technical analyst at StockCharts.com, as well sees value in using technical analysis techniques to know which money volition pump. For de Kempenaer, “crypto markets are driven by supply and demand, only like other financial markets and tradable instruments. The charts, the patterns and trends found on those charts and the indicators based on these prices don’t know whether the underlying market is a currency, a stock, an index, or a crypto.”
While there are differences between the behaviour of cryptocurrencies and stocks, especially in the mode crypto tends to movement much faster considering of its inherent volatility, “the underlying principles are exactly the same,” according to de Kempenaer, driven past “human buying and selling behaviour, based on fear and greed.”
The reality is, knowing how to predict crypto pumps is difficult at best and wishful thinking at worst. Who knows when Elon Musk is nigh to tweet “Hamstercoin to the moon” or another flippant sentiment? How tin can traders know when shady Telegram channels are planning their next pump-and-dump scheme? They generally tin’t. Merely perhaps analysing the biggest recent risers can shed some light on the situation.
Looking at the biggest risers: Apecoin (APE) and Stepn (GMT)
Using statistics provided past Coin Market Cap, we can see that ApeCoin (APE) was the best-performing cryptocurrency over the vii-day menstruum to 28 April, having risen nearly 38% throughout the week. The stiff bull run for Bored Ape Yacht Club (BAYC)’s official token kicked off on nineteen April with a 12.vii% daily pump, followed past a 25% pump the following day.
Could this have been predicted? Aside from speculative comments, no immediate game-irresolute Tweets or announcements were uncovered on any of ApeCoin’s official social media accounts to coincide with the nineteen-20 April spike. However, BAYC’s parent company, Yuga Labs, officially announced the launch date of its Otherside metaverse projection in a tweet on 23 Apri, which has so far gained more than 17,500 likes and more than half-dozen,800 retweets. APE subsequently rallied 43% in the post-obit iii days.
Stepn’due south GMT token, powering a fast-growing motility-to-earn NFT project, was the second-biggest riser, gaining almost 31% throughout the calendar week, after a 63% pump over 19-xx April. A definite fundamental catalyst coincided with this potent rally: On 19 April, Stepn announced a business partnership with the multinational sports company ASICS, prompting substantial enthusiasm for the innovative cryptocurrency.
Taking these strong rallies at face value in what has been an overall sideways or even surly market (the Fright and Greed Index currently points to Farthermost Fear), there is articulate evidence that fundamental catalysts are playing a fundamental function in crypto price movements.
The challenge for investors looking to jump in pre-pump is determining if and when major announcements are in the pipeline, and buying in accordingly. Keeping your finger on the pulse of market place trends and developments, and closely post-obit online discussions, can go a long way. While this might non give y’all a true insight into enterprises’ release schedules (and to do so could find you in breach of insider trading laws), leveraging your market noesis to make educated guesses is objectively amend than taking a shot in the nighttime.
How to know which crypto volition pump: key takeaways
If learning how to know which crypto will pump was like shooting fish in a barrel, everyone would exist doing it. Unfortunately, the volatile and oft capricious nature of the crypto markets makes this a difficult task. Additionally, the prevalence of pump-and-dump schemes ways that substantial losses can be sustained should you lot neglect to exit within a small-scale window of opportunity.
However, sentiment among traders suggests that fundamental catalysts have a greater impact on price activity in the cryptocurrency space compared to the stock market. Traders with their fingers on the pulse of industry trends, backed up with an agreement of technical assay, can likely find more rewarding entry positions than those blindly stabbing in the night and hoping for an instant payoff.
At the finish of the day, cryptocurrencies are some of the most volatile assets you tin can invest in, and few have managed to develop a foolproof way of safely investing. For budding crypto traders, Currency.com e’er recommends starting tiresome and never investing more than than you lot tin afford to lose.
What is a pump-and-dump scheme?
A pump-and-dump occurs when malicious traders artificially pump the price of a cryptocurrency through misleading statements, online hype and flash loan attacks. Perpetrators then dump their holdings, taking profit before flatlining the coin’s value, leaving the majority of investors with significant losses.
How crypto pump works?
Malicious pump-and-dumps are orchestrated over social media sites, with Reddit and Telegram being pop choices. Traders can either create their own token with the intent of pumping it, or latch onto hands manipulated small-cap tokens. Afterwards generating hype though misleading statements, articles and flash loan attacks, perpetrators dispose of their holdings for a profit while flatlining the value of the cryptocurrency.
Cryptocurrencies tin can also pump because of positive fundamental factors including project launches, substitution listings, roadmap milestones and major announcements.
Are crypto pump-and-dumps illegal?
Yeah, pump-and-dump schemes are illegal under United states of america, Uk and Eu legislation. Unfortunately, the vast majority of crypto pump-and-dump schemes become unpunished.
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