Many cryptocurrencies will no longer see their highs
The market is at its lowest point in the last two and a half years. There is an opinion that there is nowhere lower and it is necessary to buy crypto now. There is a possibility that BTC can go for $ 12,000, and the rest of the crypto will follow it. In any event, at some point the investor will make a purchase in anticipation of the subsequent growth of the purchased crypt.
All rating resources have the ATH (all time high) metric - the maximum price of a cryptocurrency token for the entire time of its existence. And some users, when making a decision about investments, focus on ATH, that is, how much cheaper is the crypto trading now. For example, Solana at its peak cost 250 bucks apiece, and now it costs $ 35, well, the conclusion is made - "now it's cheap and you need to take it."
I think that ATH is not the right guide when making a decision, although I looked at it myself six months ago. Moreover, I am sure that many cryptocurrencies will never reach their limits again. I see several reasons for this:
📌Hype. Any projects are subject to it. This one can be like completely frivolous coins like DOGE, SHIBU, heaps of incomprehensible NFTs (although surely someone does not agree with me in their assessment). There is no real business idea and technology under them, and when piglets and birds come to replace them, they will pump them.
But technological projects like DOT, SOL, ICP and others are also subject to hype. For example, at the end of 2021, the DOT price was accelerated to $ 55 apiece in the wake of the launches of the blockchain - then it was a hype topic. Now the parachains are still working, auctions are still being held on them, but they are not being trumpeted through all channels and interest has come to naught.
Or the example with ICP is an interesting project, but the price of its token at the moment was dispersed to just cosmic 700 dollars apiece. I personally bought a little at 200, succumbing to the euphoria of the news background 🤦♂️ Now he is calmly trading for 6 bucks, and I am very sure that he will never be worth even 200 more.
As soon as the information noise fades, the price of the cryptocurrency begins to decline.
📌Development of the industry. Technologies are continuously developing and those projects that are trending now may be out of business in a year for various reasons. Here we can give an example of even such tops as XRP and EOS - each of them, for their own reasons, could not overcome the highs of 2017. And that's not to mention hundreds of lesser-known projects.
For example, if we compare the TOP 100 by capitalization on the Cap at the end of 2017 and now, we will see that the list of coins is very different. This can be seen even on the example of the TOP 20 placed in the screen:
Even though there is an idea, a strong team and implementation, the project may lose popularity both due to reasons related only to it, and because the industry is developing, and it will be bypassed by new young and promising ones.
📌Holder pressure or resistance to growth. When an investor has bought crypto on hay, and the price has gone down, then he can either sell or suffer an unrealized loss in the hope that the price will rise again. If he does not sell and tolerates, then of course, he will try to take at least his own or the minimum plus at the first opportunity.
And in order for the crypt to grow to its previous highs, current holders must have strong faith in the project so that they do not sell tokens at the slightest increase, thereby putting pressure on the price.
In this regard, it is easier for a new project to grow, because there are still no holders who sell - the maximum is done by the funds and the project team to withdraw the invested and skim the cream.
As a result, I am very confident that the prices of most cryptocurrencies will never reach their highs again. In addition to the listed reasons, you can add that there are projects that are made by teams "under a carbon copy", only with the aim of issuing a token, unpacking, earning and forgetting about it. There is especially a lot of such crypto in the DeFi sector.
As for investments, focusing globally on the ATH of even the top crypto is a delusion that will lead to losses. Instead of ATH, it is better to take as a price guide the number of x's that the project made from sale. You can read more about this metric in the article"How many x's are there between the sale price and the current market price of the TOP currencies?".
Investors, including funds invested in the project on sale, want to make money. Therefore, if the current token price is not far from the sale price, it is a good sign that it will grow. Of course, this is not the only criterion for evaluating investments, but only one of several. But compared to ATH, it gives a more realistic idea of the potential for price growth/decline.
16.07.2022
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