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Pump and Dump Work in Crypto: The frustration of an Altcoin Trader
At the time of this writing Bitcoin has crossed the threshold of $7000, on Indian Crypto-Exchanges like Koinex, it almost touched ₹5,00,000/- . That is a growth unheard of. To think Bitcoin was less than a lakh in August.
Now if we look at the volatility, we see Bitcoin is much more volatile then other stocks that are being traded on stock markets. There is a much greater risk of losing money on Crypto than on stocks and people say Stock trading is risky.
If you shift your focus to Altcoins - the coins/tokens/crypto that is not bitcoin, you'll realise the volatility is much higher. These coins have far less market cap and are traded with price less than a $ or a few thousand Satoshis. 1 Satoshi = 0.00000001 BTC
These altcoins often give back more than 150-200% ROI, if invested and pulled out at the right moment.
Let's have a look at the life of a frustrating altcoin trader! Consider this chart of an altcoin first! This chart is still pretty readable, with clear ups and highs over a specified period of time.
Understand the deep down surge when the coin first gets listed! pretty strange huh? The chart on the first day shows an opening position at 15k satoshis, going all the way up to 85k satoshis, and then crashing down to 10k levels.
Look at the color coding I have done along with the numbering!
Ideally, going by the trend, we should Buy at lows and sell at highs right? So we should buy at all the lows, or the red regions, and sell at the green highs right?
Let me tell you what happens with many traders!! The opposite happens.
Ask me how and I will tell you several factors like Fear of Missing out (FOMO), Greed, Hopelessness, Hopelessly hopefulness :P, wrongly analysing and so on!
Lets analyse what happens at every step!
The coin gets listed on the market... People have great expectations that the coin will go up! They start buying... Prices shoot up... Experienced professional whales having huge portfolios jump in... Prices shoot up even more...! More people start investing.... Panic Buying sets in... People start placing buy orders like crazy, since the coin will soon be going beyond reach! Or as we say in the crypto world - Moon.
Aaaannnnd then! Whales step out with their share of profit... We see a 20% dip!!
Some hopelessly hopeful people start buying again at the dip, thinking that it was just a correction, and prices will again shoot up! so prices rise up by some 5%.
Now experienced Traders Pull out with their share of profit!!
Prices dip by a further 20%....
Those people who bought at the first -20% dip are now in a 20% loss actually!
Some ultra smart novice traders think of averaging out the costs, an buy again in the 'dip'.
Then the real panic happens! they see that the chart is going all red... What will happen?
Now some more 'smart' novice traders pull out money in the loss, just to buy more at dip!
and lol, that thing never happens! All people start selling off at loss and yes, they all end up in loss...!
Some brave people hold the coins to make profit in future 'pumps'
These brave people make the so called 'support' of the coin!
Some professional and amateur traders Buy at the dip at no 2 (refer chart)
Some hopeless and impatient traders sell of at that dip too, since they think they have already missed the train and the train has derailed! :P
Okay now comes the second part.Whales pump up again. Some overtly hopeful people see the sudden surge! They fear that the coin will pump even more, so they buy at the high! Whales dump again, going away with the profit!
Those people who faced loss go into deep shit, neck deep shit! They become frustrated!
Some quit trading, some stay hopeful that a third pump would come and they will then sell at the profit!In the dip, they buy some more coins!
Look at the next surge! Even people who bought at the all time high during the second surge could actually sell in profit. But is that the case?
NO! Because most of the traders wish the coins will surge even more! Then the coin gets dumped again, and they are back to square one!! This is Greed. And we all know what happens to the greedy.
After the third surge, we see the coin has fallen flaaaaaaaaaaat!!! (Marked by the yellow line! :P )
Some people having patience ever since will be or might be waiting forever until a surge comes again!
Lets now categorize what different groups of traders did!
Novice traders : Some bought at all time highs, and are into deep frustration! Some tried buying in even the slightest of dip, hoping to make some profit but ended up in even more loss!! They have learnt the hard way not to be greedy, and to fear at the right time, especially when the market goes up! Novice traders fear when there is a dip, and panic sell off everything by being hopeless.
Amateur traders : Some see a surge is coming, they put in more, sell at minimal profit (5-10%) and just wait for another dip....
Pro Traders : Keep on investing in dips, and sell off at highs! (Damn, they are so lucky!!)
Lucky Traders : Quite unknowingly, there exists another breed of traders, who knows nothing about trading, invest on a dip and forget... Suddenly, one fine morning, they wake up to see a 300% surge, they pinch themselves twice or thrice to see if they are actually dreaming or not, and sell off everything!! lol (We need to rob them! :P)
Whales : They pump the market once, rob the small fish in the market with their powerful tactics! so cruel huh!
I have never been a lucky trader so far... Dont know if I ever would be. there is a 1/10k probability of becoming a lucky trader. That's my guess which is right 1/10k too.
Now that most of the traders have been experienced, they are all waiting for even more dip! I would rather buy at this dip after analysing the coin, and then invest some amount, and wait for another surge! :P
What would you do!? :P
Share in the comments below!
The article was originally published on Steemit, and has been edited for FinallyJobless. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FinallyJobless. Examples of analysis performed within this article are only examples. The author and FinallyJobless insists the users to do their own research. Assumptions made within the analysis are not reflective of the position of FinallyJobless.
Follow Author Rahul Basu on Steemit @rahulbasu