Analyzing the recent outstanding price performance of 6 projects: Can this on-chain speculation trend continue into a bull market?

Original Author: Crypto Ann

Compiled by: Baize Research Institute

Despite the grim situation for major cryptocurrencies like Bitcoin, Ethereum, and popular altcoins, the reality in the depths of the on-chain world is not as "bloody." On the contrary, you often see price charts like the one below.

The summer of "on-chain speculation" is still ongoing.

But will they be solid and lasting, extending into the bull market?

Today, I want to delve into the current outstanding performance of 6 tokens. After a comparative analysis, I will examine the commonalities, patterns, and characteristics that make them perform so well (or appear to do so).

The candidates for analysis are as follows, and since the hype surrounding them is merely speculation, I will refer to them as Sh*tcoins:

• Perpetual DEX HMX ($HMX)

• Crypto game Sanko Game ($DMT)

• Telegram bot Unibot ($UNIBOT)

• On-chain gambling game WINR ($WINR)

• Non-liquidating, LSD-backed lending protocol ZeroLiquid ($ZERO)

• Meme coin $MOG

Objective: Market Capitalization

Market capitalization is the most easily noticed metric by token holders, representing achievements and milestones.

You often see on Crypto Twitter: "Let's reach a market cap of X million dollars!!" along with rocket emojis.

Among the 6 projects studied in this article, Unibot leads with a market cap of nearly $200 million, while other projects aspire to achieve this goal.

However, market cap is a misleading metric. Just like support and resistance in technical analysis. You can profit at resistance levels or buy when prices break through resistance. This actually makes no sense. Some projects can have a market cap as high as $50 million, while others may never exceed $10 million. Some projects can easily reach $5 million, but then it becomes difficult to climb higher.

Liquidity is More Important

Liquidity is actually the only comparison you need.

The highest capital efficiency is seen in $DMT and $MOG, both achieving a 10x price increase with minimal liquidity.

$HMX and $WINR still have significant room for growth, provided they maintain liquidity at current levels.

$ZERO is more susceptible to being sold off, as the ratio between market cap and liquidity is quite close. In contrast, Unibot's situation is the opposite, as with a market cap of $179 million, it is difficult to sell off or liquidate with only $7.2 million in liquidity.

The larger the gap between market cap and liquidity, the more people are forced to continue holding. Suppose Unibot's buyers successfully made a profit of $5 million, but this gain is only on paper because they cannot maintain price stability when selling Unibot for ETH. (If the liquidity pool consists of $3.5 million worth of ETH and $3.5 million worth of Unibot, they cannot sell at all because there aren't enough Unibots in the pool.)

The only strategy to win in this "chasing Sh*tcoins" speculative game is to be an early buyer (or the token deployer themselves) while keeping positions far below the liquidity pool. Buying early is best because if the token fails and faces a sell-off, you can still salvage your initial capital (cost) or even make a small profit. Insiders often gradually sell as prices rise, keeping the liquidity in the pool relatively stable, thus maintaining upward momentum.

Why Should You Sell Gradually?

I used to think that the "age" of a project or token didn't matter, but later I realized I was wrong. Although this article only studies 6 projects, the sample size is small, but a common pattern can be identified. The best-performing projects are neither too young nor too old, with the optimal "age" being a few months.

Recently, more and more project teams understand that maintaining a token's rise for a period is better than a quick pump and dump. They know that keeping the price stable long enough is sufficient for people to believe the project "won't rug," but the time cannot be too long, lest attention wane and people gradually lose interest.

I am convinced that maintaining low liquidity is one of the strategies. If you are buying "Sh*tcoins" similar to the projects above on-chain, the first thing to pay attention to is whether liquidity is increasing.

People tend to think that more liquidity is bullish, just like what happened with the $BALD token a few weeks ago. Liquidity increased to $31 million, attracting more and more buyers, and soon after, the token completely collapsed.

Conversely, if your position is large, you can view an increase in liquidity as a sell signal and gradually sell off.

Unibot, the Center of Meme Coins

I also believe that the type of project does not matter for liquidity. Generally speaking, "Sh*tcoins" work in such a way that if a token's use case or narrative is unique, the hype surrounding it tends to last longer than that of other tokens.

Here, I am referring to Unibot. For this, we need to discuss what Unibot actually is.

Supporters argue about how Unibot completely changes the user experience. I just want to say that those are all nonsense.

On the contrary, Unibot's real appeal lies in its meme coin trading features. With it, you can receive alerts for new token releases and be able to purchase tokens immediately after they launch. For on-chain traders, this is certainly a great user experience, and it is also why "chasing shitcoins" (a form of gambling) is so captivating.

In short, Unibot is not just a meme coin itself; it is the center of the meme coin universe.

Unibot has successfully maintained hype for a longer period because it has gone from being unique to becoming a leader in its niche. Other projects find it difficult to replicate its successful fate.

When the hype surrounding Unibot will end depends on the state of on-chain speculation and the overall crypto market. (Unibot keeps the liquidity pool at a low level to avoid cascading price drops.)

These "Sh*tcoins" Are Easily Affected by Capital Rotation

Once traders notice changes in liquidity in the broader crypto market, they will leave the "Sh*tcoin" speculation.

The cycle where Bitcoin and Ethereum dominate most of the liquidity will return, which usually occurs in the early to mid stages of a bull market.

As early as 2021, DeFi blue-chip tokens like $UNI and $SUSHI had stagnated, while newcomers (Layer 1 "Ethereum killers") pushed the bull market to its peak. The situation is no different for the 6 "Sh*tcoins" mentioned in this article.

However, true bull market thousand-fold projects are lurking somewhere. Their tokens will not increase 10 times in 2 months, and they are certainly not just another perpetual DEX among the many. Currently, there is a significant gap between the prices of these tokens and the innovation/quality of the projects themselves. At least during the "on-chain speculation" boom of 2019-2020, DeFi blue-chip projects like UniSwap and Curve were indeed novel and pioneering, while the current "Sh*tcoins" lack these qualities.