Many altcoins have entered the “relief rally” and are up 20-40% from their lows. There are three reasons why such a rise is possible: correlation between the price of the altcoin and the price of the underlying asset. For most DeFi altcoins, a -30% drop in ETH will cause the token to decline by about 50-70% – that’s your “Beta coefficient” In this case, you need a stable and growing underlying asset to make the beta work in your favor. If ETH starts to fall, catalytic events at the token level matter less.
DeFi degen and enthusiast
Given the recent 13% rise in Ethereum – many altcoins have entered the “relief rally” and are up 20-40%.
Now I will name three reasons why such a rise is possible:
1. Correlation between the price of the altcoin and the price of the underlying asset
The beta in this case is how much your asset will move relative to the underlying pair (usually ETH).
For most DeFi altcoins, a -30% drop in ETH will cause the token to decline by about 50-70% – that’s your “Beta coefficient”.
Conversely – so in this ETH rally, up ~13% from the lows, altcoins are up about 20-40% from their lows.
As a starting point, you need a stable and growing underlying asset to make the beta work in your favor.
Conclusion #1: Expect the underlying asset to rise
In challenging market conditions, your shitcoin is unlikely to rise against the decline of ETH.
2.💡 Unique fundamental events in projects.
As the ETH decline stabilizes, it’s important to keep an eye on the project’s Twitter and Discord. As soon as you see cool fundamental news – powerful partnerships, infusions of investment, new uses for the token – that’s a great reason to enter the trade.
Keep in mind that cause #1 is more powerful than cause #2, so if ETH starts to fall, catalytic events at the token level matter less.
But at the same time, if you are in the trend of rising ETH + the project is innovating, it will allow the project to be stronger than the market in the rebound.
Conclusion #2: Follow the news and use it wisely.
3.⚙️ Token issue.
If large token unlocks or high farming rewards occur, your token may be losing ground to ETH (or other underlying assets), especially during the bear market.
In the bull market, token issuance, high FDV and unlocks matter less
Conclusion #3: keep an eye on token issuance, study project tokennomics and investor funds unlocking calendar in advance.
How to put this into practice?
Constructively understand where the market is moving to be able to jump on the rebound wave. Monitor media sentiment, the S&P 500 and BTC chart, and the Fear Index – all of which together will help identify the trend.
Figure it out – is the altcoin you’re trading growing or dying?
To do this – examine the project’s discord and look for upcoming fundamental events, changes in tokennomics. It’s worth investigating whether an event that will happen is capable of immediately changing the order of things, or whether it’s a distant prospect.
Most “catalysts” aren’t really necessary for anyone (all those Twitter partnerships that small projects are so famous for).
Look for news that will either increase the volume of demand for the token, increase TVL over time, or bring more attention to the project.
Taking into account that the information asymmetry doesn’t allow you to see the prospects at once – you need to buy tokens gradually, by buying up, guessing the bottom is not easy, you need to keep the position sizes small.
Remember – this is not a trend movement, but only a short-term rebound, Pump.
Try using leverage. This is the RISK/REWARD when you should be doing this – you can clearly see the previous bottom and can be guided by it when setting a stop loss.
As a true-degen, I haven’t used Binance Futures for a long time, but use various DeFi protocols like WOWswap to add leverage to my position. In addition to independence, DEXs also give you a number of advantages in an effort to drag clients from large CEXs – so, on WOWswap for example, leverage fees are charged only if the position is closed in the plus. On other platforms, you may be rewarded with native tokens for opening a position, and so on.
Take advantage of these benefits. Every cent counts for trading.
Because of the small bounce, there is no need to go into FOMO and stock up on all altcoins at once.
Instead, be patient, improve your research process, and find the projects and wallets that interest you the most.
Be patient, don’t panic. The market is going through a small rally/short-squeeze, many ALTs are still overvalued, teams are dumping, and communities are abandoning projects.
Find your edge in the market, lurk, and spot-shoot underperforming projects.
Disclaimer: Nothing in this article constitutes professional investment advice. Please do your own thorough research before making any investment decisions.
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