As a seasoned crypto investor with years of experience under my belt, I’ve seen the trend of pre-launch token trading gain significant traction among investors. However, I must admit that this phenomenon comes with its own set of challenges and risks.
Trading cryptocurrency tokens prior to their official launch has become increasingly popular amongst investors. However, this practice comes with a higher degree of price instability compared to trading in the token market after its release, potentially increasing volatility by up to twenty times.
During the pre-token generation event (TGE) stage, cryptocurrencies such as Wormhole’s token exhibited more than 3,000% price fluctuations in comparison to approximately 100% one week post-launch. This volatility was determined through historical analysis using seven-day standard deviation returns based on the volume-weighted-average-price (VWAP).
As a researcher, I have come across intriguing data regarding the Jupiter (JUP) token’s volatility. Before its launch, JUP experienced an extreme price fluctuation, reaching approximately 2,800%. However, just one week after its debut, this volatility dropped significantly to around 150%. This information was obtained from a report generously shared with CryptoMoon by Keyrock.
As a crypto investor, I recognize the significance of market liquidity on a token’s volatility. By closely monitoring this relationship, I can make informed decisions and assess the risks involved in my trades, as suggested in the Keyrock report.
“The disparity in volatility before and after the TGE underscores the critical role of liquidity in stabilizing markets. This phenomenon highlights not only the importance of sufficient market depth for effective price discovery but also serves as a crucial indicator for buyers and sellers alike.”
As a crypto investor, I’ve noticed that during the pre-launch phase, the markets for tokens before their Token Generation Event (TGE) don’t have enough liquidity. This means that the natural process of determining a token’s price through the interactions of buyers and sellers, which is known as price discovery, seems to be absent.
“Without liquidity, there is no price discovery” — Keyrock
Before the Token Generation Events (TGEs), traders are increasingly engaging in this activity despite its inherent risks such as illiquid markets and price volatility. This trend is driven by investors who are willing to take on more risk in order to secure an early position in promising new crypto projects, with the potential for greater returns.
Numerous significant investments made before a launch by major investors, often referred to as “whales,” appear to be linked to the anxiety of missing out (FOMO) on profitable opportunities. Consequently, these whales frequently purchase at comparatively higher prices, as suggested by Keyrock.
“The Whales Market tells a different story, experiencing a dramatic spike just days before TGE. This surge? It’s likely fuelled by a palpable wave of FOMO, with buyers making up a whopping 80% of the market action.”
Due to the increased volatility, most pre-TGE markets are unprofitable for buyers.
Over 95% of ENA and PIXEL pre-token investors are in the green
In the face of the early market turbulence, over 95% of the early investors in Ethena Labs’s ENA token and Pixels’ PIXEL token have achieved profits, demonstrating the lucrative prospects of investing prior to the Token Generation Event (TGE).
Based on information from CoinMarketCap, the value of an ENA token has risen by 14% since it was launched. On the other hand, the price of a Pixel coin has dropped by more than 31% since its token generation event.
Despite the success of Portal’s (PORTAL) token launch, other similar initiatives didn’t generate the same level of interest. Over half of the investors who purchased Portal prior to the token sale have experienced a loss, with the token dropping approximately 82% in value since its debut at the end of February.
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2024-05-14 16:27