Small-Alt Season: Why They’re Pumping, and One Way to Spot them Before They Do
As the slow (but volatile) winter period continues in the crypto market, more than one small-cap altcoin has managed to buck the broader trend in recent weeks.
That pattern continued on Tuesday as a handful of alts grew almost 40% in value over twenty-four hours, including Factom (FCT) and Loopring (LRC). The day previously, the much ridiculed cryptocurrency for the truck racing industry, Buggyra Coin Zero (BCZERO), hit over 200% growth in just a few hours.
But not all pumps are created equal, and the reasons behind their sudden appearance at the turn of the year are many-fold.
According to this recent Twitter poll conducted by Hacked and eToro’s Mati Greenspan, most people believe that Sunday’s market dip was a result of manipulation, as opposed to bots or whales (although, in reality, the crossover between the three must be huge).
If the consensus is that dips are a result of manipulation, then should the same rationale not be applied to pumps? Such a cynical view might make the current swathe of fundamental and technical analyses seem pointless. Yet, both methods of analysis continue to prove useful when trying to anticipate market movers.
Coincidence appears to play an important role in cryptocurrency pumps. Market pumps which coincide with some new tech rollout, exchange listing, or upcoming airdrop serve to convince the market that the current growth might be genuine and long-lasting.
But the inevitable dump which follows one of these pumps often returns the coin in question back to square one. As this happens often enough, one starts to see how crypto fundamental developments are used as a convenient smokescreen for market manipulation. For recent examples look at the lead up to the Bitcoin Cash (BCH) hardfork, or the recent Komodo (KMD) hardfork surge, which saw 94% growth recorded in December, followed by a reversion back to square one by January.
The many-headed beast that is technical analysis continues to throw up winners and losers, and the recent market plunge has already seen more investors turn to TA as a way to minimize losses.
But there are still ways to anticipate which simmering coin is about to come to the boil without getting too technical. Excluding the ridiculously small-volume tokens, the number of times that a surge is preceded by a steady rise in trade volume stands out as a very reliable marker.
Just yesterday, Factom (FCT) was priced at $6.51, and trading at a volume of $130,000. Over the next two hours that volume doubled, and it continued to double every few hours as the coin price pushed slowly upward. By Tuesday morning FCT was priced at $8.86 – a 36% increase; accompanied by rising volume which hit $2 million – a 1,438% influx.
Another example is yesterday’s strong performer, Tron (TRX), which also grew steadily as trade volume trebled over 48 hours.
Tuesday’s other top performer, Loopring (LRC) saw a more sudden 43% price jump without the slow build up of volume here described. However, take a look at LRC’s past week and you see a coin which has slowly increased its trade volume almost day-on-day – from last Tuesday’s $800,000 up to today’s $25 million – a new seven month high. Almost any point up until this morning would have proved a profitable buy-in point for LRC.
Hindsight is known for its crystal clear vision, so let’s put this simple little crackpot theory to the test.
Zilliqa (ZIL) just posted 4% gains as trade volume doubled from $7 million to $14 million on Tuesday morning alone. Daily trades reached as high as $29 million earlier this week, and a look at the monthly chart shows massive volume and price pumps at regular intervals.
At the same time, Steem (STEEM) volume more than doubled on Tuesday morning, from $9 million to $19 million. Despite STEEM’s more than 50% gains already this week, daily volume only continues to rise, and just bypassed a four-month high in the process.
Consider these my two predictions for the coming days.
Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.