$RED trading restrictions were lifted and the price immediately pumped to $1.4609. This pump quickly reversed and it's going down. Is this fraud or a scam?, No!. Here is an explanation and technical analysis.
Launchpool & Pre-market
Let us start by explaining that this is a pre-market asset and it's not open to general trading. The people right now who can participate in this pre-market trading is the people who locked assets during the launchpool.
Circulation supply & Airdrop
Remember during the launchpool there was a period where people locked their assets and there was a farming period where 40M RED was airdroped to people who locked assets.
All of these 40M tokens was distributed and are currently been held by traders like me and you. In this pre-market only this 40M tokens are in circulation and represent the supply currently available for trading.
Market sentiment
Because the people currently trading this coin are those who participated in the launchpool most of us are very bullish and we are expecting the coin to pump.
Furthermore, many traders were confused by the price limit mechanism and trading restrictions that were placed at $0.4, $0.6 & $0.8. This has affected most traders' sentiment because everyone is of the opinion the coin is going to pump above $0.8 or even $1.
Analysis
Based on the factors explained above it's safe to infer why the coin pumped quickly then dropped and where the price is heading. I will breakdown this analysis into 3 parts:
Reason for pump
Reason for price drop
Price prediction
Reason for pump
The price of an asset is determined by the most recent trade made on binance for a given asset. So when trading opened there were traders who had RED of up to 5000 RED which was the limit.
Some traders placed sell orders starting from $1.062, which was the lowest price when trading opened, and more sell orders were placed between this price and $1.4609, which was the highest price reached.
Because most people are bullish there were very few sellers limiting the supply and the more bullish traders bought this coin at these prices or other prices in between. The reason why they bought can vary but may include but not limited to:
They wanted more tokens
Speculative reasons hoping for a pump
So this brief trading activities is what caused the coin to pump.
Reasons for price drop
The market sentiment during the time the price had a price limit and trading was restricted a lot of traders were expecting to buy the coin for $0.4, $0.6 or $0.8. Since the price pumped to $1.4+ a lot of traders didn't want to buy at this prices.
This forced most sellers to lower prices to get buyers and the more they lowered the more buyers stayed away because they are waiting for a price below $0.8.
This is why the price is dropping.
Price prediction
Because the circulating supply of RED is controlled by us, people who participated in the launchpool, there is a low probability sellers will be willing to sell at a price below $1 because we are bullish and if they do sell at any price between $1 and $0.8 it will quickly be bought because of limited supply.
For buyers, only a few traders will be willing to buy the token between $1.2 & $1.4 because they expected to buy at $0.8 or lower. Even if sellers decided to sell at this prices, the coins will be quickly bought and because of low supply it will cause a price pump due to demand. This high price will push away buyers causing the price to go down again as sellers reduce prices.
So the token will trade between $1 and $1.2. For the price to go below $1 we need more sellers and for the price to go above $1.2 we need more buyers.
Conclusion
This is pre-market trading, there are very few traders because only those who participated in the launchpool can trade. Furthermore, there is limited circulating supply of 40M RED held by us and many people don't want to sell or buy at high prices.
I also want to emphasis that this is pre-market trading and its main purpose is to allow the asset to discover its price by using traders like us to gauge market supply and demand dynamics.
Recommendations & Way forward
If you feel bearish please maintain, no need to panic, this is just the start the coin hasn't launched to the general traders.
Binance hasn't announced the date when the coin will be available to general traders. We are waiting for them to announce. Once it launches fully this coin could pump to over $2 so hold strong, diamond hands 🤲 💎.
Thanks for reading
Disclaimer: This should not be considered financial advice. Always do your own research. #dyor
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