Still far below the all-time high—does that automatically make it cheap?
Suppose a token once traded at 100 and is now at 20. Being 80% below its old price only tells us the gap between the two prices; it doesn’t prove the token is undervalued by 80%. If we treat the price from its heyday as its normal value, it’s easy for our later judgments to revolve around an outdated number.
In its guide to trading psychology, Binance Academy identifies fixating on an all-time high as anchoring bias. It’s a striking and memorable reference point, but it won’t update itself to reflect changing market conditions.
The circulating supply, user demand, and sources of buying pressure at the time the old high was reached may all have changed. Even if a product is still operating, we need to reassess whether new demand can absorb new supply. A price people were once willing to pay is no promise of what future buyers will pay.
When looking at $BTC , $ETH , and $SOL , I first set aside the percentage showing how far they are from their previous highs, then write down the evidence for current demand and supply. If, after removing the old high from the equation, all that remains is “it got there before, so it will get there again,” then the judgment lacks fresh support.
The same goes for a selling plan. If the only exit condition is “wait for it to return to its previous high,” the actual holding period may keep getting longer, tying up your capital. I’d rather spell out what evidence needs to emerge and what changes would invalidate my thesis. Historical prices can help us review the past, but they can’t replace the work of valuing an asset today.
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Suppose a token once traded at 100 and is now at 20. Being 80% below its old price only tells us the gap between the two prices; it doesn’t prove the token is undervalued by 80%. If we treat the price from its heyday as its normal value, it’s easy for our later judgments to revolve around an outdated number.
In its guide to trading psychology, Binance Academy identifies fixating on an all-time high as anchoring bias. It’s a striking and memorable reference point, but it won’t update itself to reflect changing market conditions.
The circulating supply, user demand, and sources of buying pressure at the time the old high was reached may all have changed. Even if a product is still operating, we need to reassess whether new demand can absorb new supply. A price people were once willing to pay is no promise of what future buyers will pay.
When looking at $BTC , $ETH , and $SOL , I first set aside the percentage showing how far they are from their previous highs, then write down the evidence for current demand and supply. If, after removing the old high from the equation, all that remains is “it got there before, so it will get there again,” then the judgment lacks fresh support.
The same goes for a selling plan. If the only exit condition is “wait for it to return to its previous high,” the actual holding period may keep getting longer, tying up your capital. I’d rather spell out what evidence needs to emerge and what changes would invalidate my thesis. Historical prices can help us review the past, but they can’t replace the work of valuing an asset today.
Tap my profile picture to see my live trades