During the long, hot summer of defi, one token rose above all others. From mid July, the ERC20 asset rose from zero to hit a price of $600. Then $1,000. Within a month, it had surpassed $5,000, and predictions were flying about as to when it would “flippen” bitcoin. Those predictions took less time than even the coin’s biggest bulls expected, and on September 13, the asset hit a high of $43,000 per token. Then it began to fall and it hasn’t stopped dropping since.
The rise and fall of YFI, the trendy governance token created by Andre Cronje, is an exercise in many things: market mania; digital scarcity; demand for yield-generating assets; hype cycles. But for the purposes of this article, its decline serves to illustrate the novelty of “new” and the speed with which traders will drop the current thing for the next new thing.
Lmfao boomer. That's sooooo last summer
— Romano (@RNR_0) November 3, 2020
Forget circulating supply, vesting, founders’ allocation, use case, partnerships, or yield-generating ability. When it comes to investing, there’s only one metric that matters: age. The lower the number, the higher it will fly.
Why High Time Preference Wins
“Don’t marry your bags” is a familiar adage to altcoin traders, all of whom have been guilty of fulfilling it at some point in their career. “This coin is different,” they’ll insist, locking it away in their Trezor for long-term safekeeping.
By the time they return to it, six months later, it’s down 90% and isn’t worth the cost of selling for shrapnel.
What I've consistently found to be true in trading crypto is it is much better to buy things that are continuously going up rather than buying the "dip" when it comes to altcoins. It seems counter intuitive but it's not.
— Flood (@ThinkingUSD) October 30, 2020
Everything trends to zero over time. It’s just that with altcoins, that time is condensed into a breathtakingly fast cycle. Pull up the chart for any Uniswap coin and you’ll see the same shape play out time and again:
This is STACY, which launched 72 hours ago, but it could be any ERC20 token.
The question is, why?
Why is it the case that altcoins, no matter how strong their fundamentals, follow the same trajectory: a rapid pump followed by a slow and inexorable dump?
A few reasons spring to mind:
- Shortening cycles: in 2017, alts took a year to drop 90% from their ATH. In 2020, defi tokens have achieved this in 90 days.
- Too many tokens: the proliferation of tokens has resulted in an all-you-can-trade buffet of ERC20s that can be entered and exited on a dime
- Increase in scams: rug pulls via infinite mint or liquidity removal make traders wary of hodling for too long
- Diminished attention economy: macro trends are driving shorter attention spans as exemplified by the TikTok generation. Faster market cycles merely mirror the accelerating news/showbiz/fashion cycle
Ask yourself this:
Is your altcoin creating revenue?
If not, how long till it does?
If that period is longer than a few months what are the chances a new coin comes out that does the same better?
Shits way too complicated for me, I just trade them assuming they're ponzis.
— DonAlt (@CryptoDonAlt) October 28, 2020
Don’t Buy the Top and Avoid the Dip
From a trading perspective, the only rational approach is to view altcoins as ponzis – even though most are not scams in the classic sense of the word. Treat them like the dirty little shitcoins that they are, good for nothing other than a pump and dump, and you’ll avoid becoming emotionally attached. Bitcoin you can love. ETH you can develop feelings for. TRX you can hate like coronavirus, but that doesn’t mean you can’t trade the shit out of it for a while.
Avoid letting a single altcoin into your heart and you’ll avoid having your heart broken.
You might think Monero has superior privacy tech. Or that Polkadot has greater scalability. But it all amounts to squat when Bitcoin comes calling or global markets start crashing. Every altcoin has its day and every midcap its moon, but the trick is to get out when the going’s good and never look back.
No Coin Bar Bitcoin Is a Keeper
On October 28, Andre Cronje, creator of this year’s once-hottest coin, released his latest project: Keep3r. Its token shot to $200 on its first day and has been hanging around there ever since. It’s not as scarce as YFI, nor does it generate yield like its predecessor, or have the undivided attention of Yearn Finance’s 30-strong team. And yet its chart looks extremely bullish alongside the beleaguered YFI, a token which is itself barely four months old.
To chalk the opposing fortunes of the two tokens up to KP3R’s newness would be a gross simplification; everything from yield farming fatigue to the ability to short YFI on futures markets have also taken their toll. What’s evident, though, from studying the chart of any crypto asset bar bitcoin is that their half-life is frighteningly short – and once they sink into that pit of despair, few ever return.
For every LEND, reborn from the ashes of a bear market, there are 100 CRV; projects destined to die a slow death at the crypto casino.
Everyone knows that the aim of the game is to accumulate more bitcoin. But in the heat of the moment, amidst the shills of crypto twitter, it’s easy to become attached to an ERC20. “This one’s different.”
Stop kidding yourself. Trade it. Take profit. And then move on to the next one.
Forget circulating supply, real world adoption or muh fundamentals. When it comes to appraising altcoins, ‘new’ is the only token metric that matters.