What ACTUALLY moves markets
This will be a fun one. It's our entire market theory encapsulated into a single post, and the lessons learned are absolutely applicable to trading.
Here it is: All market movement is almost entirely controlled by a very, very small group of the top holders of any particular asset. Let’s use Waves for this example. The Waves team has a massive amount of Wave tokens, which they have given to themselves upon the creation of the token. From the start, this has determined the key incentive at play. The Waves team directly profits from increasing the price of their token.
However, the way in which they increase that price is the key. They do not need to “build” anything at all. They don’t even need to have a product. All they need to do is borrow or rent seek money and buy their own tokens up with that money. This artificial buying pressure is noticed by real traders, most of whom use trend-following strategies and want to jump on the buy-side along with the manipulators. This results in a trend that in the beginning requires great force to create and in the end takes on a life of its own in the form of trend following traders and no longer requires manipulation. At the start, buying the price up is like rolling a boulder up a mountain. Once it reaches an inflection point and builds a strong upwards momentum, it’s more like rolling a boulder DOWN a mountain in that it requires no effort at all.
So what does this all mean? It means that in order to make a profit, we have an untested but possibly lucrative strategy.
1: Identify teams who have allocated themselves and other very wealthy investors like VCs a large share of their own tokens.
The token’s fundamentals are not as important as who will be giving the capital to fund the initial momentum push, the same people who will get the privilege of cashing out at the top for a well-deserved reward.
These major players need to be aligned such that they will be prepared to execute this strategy:
Use their token as collateral to borrow USD -> pump their token with the borrowed USD -> Borrow even more USD, since the value of the collateral has increased -> repeat until a high enough valuation is reached, and then sell all the tokens. The more capital they have (namely, the more tokens they allocate to themselves and major players they give tokens to), the better the pump will be.
2: Buy their assets at a cheap valuation
3: Wait for them to increase the price of their asset, and then dump it on retail when the momentum starts to slow down
Here it is: All market movement is almost entirely controlled by a very, very small group of the top holders of any particular asset. Let’s use Waves for this example. The Waves team has a massive amount of Wave tokens, which they have given to themselves upon the creation of the token. From the start, this has determined the key incentive at play. The Waves team directly profits from increasing the price of their token.
However, the way in which they increase that price is the key. They do not need to “build” anything at all. They don’t even need to have a product. All they need to do is borrow or rent seek money and buy their own tokens up with that money. This artificial buying pressure is noticed by real traders, most of whom use trend-following strategies and want to jump on the buy-side along with the manipulators. This results in a trend that in the beginning requires great force to create and in the end takes on a life of its own in the form of trend following traders and no longer requires manipulation. At the start, buying the price up is like rolling a boulder up a mountain. Once it reaches an inflection point and builds a strong upwards momentum, it’s more like rolling a boulder DOWN a mountain in that it requires no effort at all.
So what does this all mean? It means that in order to make a profit, we have an untested but possibly lucrative strategy.
1: Identify teams who have allocated themselves and other very wealthy investors like VCs a large share of their own tokens.
The token’s fundamentals are not as important as who will be giving the capital to fund the initial momentum push, the same people who will get the privilege of cashing out at the top for a well-deserved reward.
These major players need to be aligned such that they will be prepared to execute this strategy:
Use their token as collateral to borrow USD -> pump their token with the borrowed USD -> Borrow even more USD, since the value of the collateral has increased -> repeat until a high enough valuation is reached, and then sell all the tokens. The more capital they have (namely, the more tokens they allocate to themselves and major players they give tokens to), the better the pump will be.
2: Buy their assets at a cheap valuation
3: Wait for them to increase the price of their asset, and then dump it on retail when the momentum starts to slow down
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The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.