I wrote this article to help you understand the nature of liquidity so that in the next article I will post instructions on how to bet on lowcap shitcoins such as changing the chart name, BUSD, BTC pair and Fibo betting to make it easier to understand to avoid following the bet in the same way. mechanical and flexible.
* Note: all are examples, not bets

Why do some tokens only release a small amount of tokens but the price plummets?

For example, BNX had a shark wallet that dumped 3M tokens but the value dropped 50%.

Despite its high capitalization, with just a small amount of force, this token fell miserably. Of course, this is partly because when this shark wallet is released, it triggers a domino effect, but the key problem is that this project is too illiquid. This BNX token is mostly held by a few wallets, evidenced by the fact that in the past, the BNX price has kept its price extremely well since March 2022, the price has always been above the EMA89 frame D, but recently the 3M tokens have disappeared. more than 50% of the value, sharks both help maintain the price and cause the token to depreciate.

It can be seen that in this case, tokens with large capitalization are not a safe haven, but tokens with large liquidity are a safe place.

When there is no cash flow, especially during the Downtrend, projects without liquidity will gradually appear.

That's why even though there are tokens that are increasing strongly, even if they are large capitalization,... just a sufficient amount of token release will cause half of their value to disappear.

There are the following ways to check liquidity:

  • Check the trading volume (compared to capitalization): there will be fake volume because the bot buys and resells, check more carefully then go to Messario. For example, OP on December 16, the volume reported on coinecko is 89M but the real volume is there. Only 29M (how to calculate the algorithm is up to me but it seems trustworthy)

  • Orderbook depth is basically the buy wall and the sell wall. The thicker the price, the better the liquidity (compared to capitalization).

  • Slippage when trading: the lower the difference, the higher the liquidity. For example, high-liquidity coins like BTC have very small slippage of about 0.01%, while lower-liquidity coins have high slippage like BEL, up to 0. .24%

Below are 2 websites to check and check the liquidity of lowcap coins and shitcoin:

https://dex.guru/

https://moonarch.app/ (be sure to switch to the correct network).

Why do some PUMPs swallow once and then throw them away while others don't?

Most projects that pump up strongly will go down quickly, but when Fibo breaks through the 0.786 area, there will be a rebound (mostly). But there are stocks like OSMO, BNX, SNM that pump all the time and then break without any recovery, even with big cap stocks like OSMO. Because the orderbook is not thick, that means the token on Binance is in the minority holding it, not retail investors. The shark had already held all the tokens, so the whale let out one shot to destroy all resistance. In addition, due to API trading bots, according to the settings, every time there is a breakout, it jumps in to sell/buy, pushing up the price in a domino effect.

After that, they distributed it very quickly without any purchasing power from retailers. As for projects with recovery power, it's the opposite, but most of them go up slowly but go down gradually. So no matter what stage the market is in, especially the Downtrend you should pay attention to market sentiment because crowd psychology is very important. However, everything has its two sides, for example, if you are the few who can buy SNM at 0.65 and sell at 4$ (peak is 13$) compared to you who buy LINK that is sustainable but increases slowly, then which one would you choose??

=> Currently it's the shitcoin coin season and there are many ways to choose, usually we will bet according to the withdrawal tips but if we can't choose a good coin and are afraid of losing capital, we still have a second chance which is to bet. Fibo recovery bet. To bet on the return bet, you must choose and recognize which numbers will recover and which numbers will be thrown away. In addition to the criteria I wrote in the selling tips article, you should prioritize choosing those with the main volume on Binance > 60% volume.

Re-read my Tips for Shedding Items here

In addition, looking at the orderbook is also a good way to take profits. If you pay attention to the price of the sell orderbook wall, whichever orderbook has the most orders, you can place a sell order in advance of that wall. Of course, you should combine the factors of volume, RSI, and candles. again.

Why do some futures listed have more liquidity than non-listed ones?

Futures, also known as derivatives, are a tool to increase market liquidity, support speculation and defense. Because in the crypto market, the level of volatility is extremely high and traders can take advantage of that to exploit liquidity and price differences. For example, coin A has low liquidity and the futures list can be taken advantage of by opening a Long order with coin A and buying spot with a large amount of token A. At that time, the price of coin A will increase sharply, of course, due to low liquidity. and small caps, usually traders prioritize floors without price slippage, but floors with price slippage are also taken advantage of.

As for defense, I will take the example of the recent event HOOK Binance Launchpad. To participate in this event, you need to have BNB and keep it for 7 days. You decide to buy BNB but you are afraid of BNB falling in price. , to avoid losses, you open a short position in BNB and wait until the event is over, then you just need to close that short position.

Derivatives also have a pretty good defense mechanism, which is to avoid projects that are overvalued. Typically, Aptos listed Futures a few hours after listing. Binance informed Aptos that when listing The exchange said that it is not allowed to list the floor with a cap that is too big or else it will be sold short. Thanks to that, Aptos' capitalization does not leave the price too high when listed on the floor.

In the case of some small cap projects with low liquidity but still being able to list futures such as UNFI, LIT, etc., only futures are listed on Binance, and Bybit specializes in derivatives, I won't say anything (anyone who plays this exchange should stay away. This qq floor specializes in derivatives that kill all fake orders, all candlesticks) simply because Binance already holds all the tokens, so price manipulation will be almost non-existent and Binance has price slippage and anti-manipulation mechanisms and sometimes even Use it to kill our short command too.

Just pay attention to why in the Downtrend there are some small-cap derivatives lists that suddenly increase in the Downtrend like LIT, LEVER, UNFI? Partly to kill the short, because of traders' psychology, if they see it increasing, they jump into shorts, so the bookie Pumps to kill the order and that killed (liquidated) order will continue to push up the price of the token just like that and the bookmaker Just discharge at a high price. Funding rate of these animals is always above -0.75%.

=> For projects like this, I will prioritize playing Long fomo over Short, but it's best to just sit back and watch.

What is the technique for valuing a token? Who decides the price?

With CEX, when calculating the price of tokens, there are two main types: first, traders will match orders with exchanges such as BingX or traders will match orders with other traders or match with typical bots like Binance.

With DEX floors, liquidity pools are often used with an interconnected mechanism because in order to avoid exploiting that arbitrage (price slippage) first, whichever floor has its own pool, it should be exploited for price slippage quite a lot, or it can be used. LINK's Oracle data to get the average price from CEX and DEX exchanges. In addition, the price is also determined by arbitragers, for example, eating the difference when buying at Uni for 0.5 and selling at a certain CEX for 0.6 . In short, the price of a token still depends on which party has good liquidity and that party decides.

In general, I have researched and found it complicated and also found it inapplicable. Many people who want to read it should type and read all the keywords about "oracle". In general, this has a lot to do with tech and I think you don't need to understand it in depth.

=> When you understand this mechanism, you can take advantage of it to exploit liquidity and slide prices, usually applied to junk coins and grass floors. Find projects that have been published on the DEX after it lists the grass floor.

Better understand capitalization, liquidity and the actual amount of money needed to push token prices

In theory, a coin A has a capitalization of 2 billion dollars and to have a price of X2, it needs another 2 billion dollars, but what about reality? Most crypto projects are highly capitalized compared to their real value, the real value of a coin lies in the liquidity of that coin.

For example, according to the theoretical calculation, you buy C98 for $6.5 (the price of $6.5 means there are only a few tens of thousands of tokens worth $6.5 at that time) and many new people are also buying at a high price. Swing the top there. At this time, C98's Market Cap has reached more than $1 billion. Now C98 is only priced at $0.22, equivalent to a Market Cap of only 48M, so it takes about $1 billion more to pump back to the old peak at $6.5, which is ~30 times of course. is increased because of paying tokens. According to reality, in most projects, sharks hold all the coins so they do not need that amount of money. If analyzed carefully, C98 cap 1 billion now while 48M needs more than 1 billion to increase to the old peak, which costs a lot of money. and what actually happens is not true.

Suppose MM of C98 (most projects are held by MM holding a large amount of tokens) and the dev side holds about 50% of the total supply. Long-term holders and C98 swing teams priced from $1 to $6.5 or more hold about 20%, but in reality, individuals hold about 10%. Suppose that when the price is increased by 20%, only 50% of individual investors will release because they are waiting for a higher price to release, so somewhere around 200-300M is needed, but in reality the project team does not spend that much. MM's specific cost is probably at most 10M$.

However, this is also an extremely huge amount of money, but in reality, the shark will trigger a cash flow domino effect at this time, so the amount of money needed to push this price up will also be part of the small fish. So don't just look at the capitalization and be afraid that the price won't increase anymore, the important thing is that MM has the power to push the price, the most important thing is still the price and liquidity, don't just look at the capitalization.