Can quick rebounds create profits for traders? A review of the 4 best-performing volatility tokens

Written by: Crypto Researcher Ann

Compiled by: Bai Ze Research Institute

By observing the market trends in the first half of 2023, I have compiled a list of volatility tokens that performed well.

The key criterion for being on the list is, of course, volatility. Like other parts of the market, if the market crashes, these tokens will also drop, but usually less than others. What sets them apart is their strong rebounds, often allowing traders to earn 10%+ daily, providing excellent opportunities.

Moreover, the price fluctuations of these tokens are also great for DCA (Martingale strategy) style traders, offering instant gratification. Don't you like buying assets at the bottom (support line) and seeing them rise? Don't you prefer assets with a clear bottom rather than those that may not have one?

Arbitrum (ARB)

The native token ARB of Ethereum's leading L2 Arbitrum is a young token—launched less than a year ago (March 2023). Since ARB was launched during a bear market, it has yet to experience its "explosive moment."

If you take a close look at the chart below (source: Coingecko), it’s easy to see how this token differs from others. Overall, ARB's performance this year has not been particularly impressive. However, compared to most tokens that have plummeted 90% since the peak of the 2021 bull market, ARB's price chart is far from pathetic.

This year, ARB has experienced several price increases, but there has been almost no fundamental reason behind them. The most recent spike occurred during the ETHCC event, with rumors that the project team was about to make some significant announcements (which ultimately did not leave a strong impression).

Aside from some technical analysis predictions, I have a few theories about the reasons behind these price increases.

ARB has a long way to go before investor token unlocks. According to DeFillama data, ARB's first unlock will begin in 200 days, on March 22, 2024.

Therefore, since the token's release, there has been no large-scale sell-off of ARB, and assuming that most people who obtained ARB through airdrops have already sold, this has triggered some volatility, creating profit opportunities for traders.

As the token unlock date approaches, we can be sure that ARB's price will drop. However, I have been in the cryptocurrency market long enough to know that token prices often rise before the unlock. I know this is a strange logic, but if you understand the game theory of the cryptocurrency market, you will know that investors will not sell their tokens cheaply. The rebound "helps" create FOMO, providing liquidity for these investors' large-scale sell-offs. While this theory is just an urban legend, it still makes sense to think about it.

Fundamentally, even during a bear market, Arbitrum has successfully solidified its position as one of the successful projects. It has found a niche market, becoming the No. 1 DeFi L2. Moreover, GMX, built on it, has become a "mascot" protocol that attracts new users, thereby increasing fee income.

In summary, the combination of token status + fundamental value makes ARB a great volatility asset.

Optimism (OP)

At the time of writing, OP is experiencing token unlocks, and the price has shown some volatility. (August 30, 2023)

The native token OP of another leading Ethereum L2, Optimism, recently demonstrated how tokens can rise before unlock events.

In two months, OP rose from $0.89 to $1.80. During the recent meme coin craze, OP was also one of the relatively "prosperous" tokens, rising alongside tokens like BALD and UNIBOT.

The reason for the rise (excluding any irrational market factors) is the recent improvement in Optimism's reputation. Coinbase built their Base chain on Optimism's OP Stack and signed a revenue-sharing agreement beneficial to both teams. Not to mention, the launch of the OP Stack and the OP Stack chain ecosystem during the ETHCC event also contributed to the market's excitement and the price increase.

The establishment of the partnership between Coinbase and Optimism proves Optimism's status as a top L2, challenging Arbitrum.

My personal trading experience with OP is that this particular token is in high demand. During downturns, reversals always happen quickly and quite violently. On Binance, OP's trading volume is quite substantial, making it one of the highest-volume tokens, with even larger trading volume in its perpetual contracts.

Solana (SOL)

After the disastrous moments of FTX last year, Solana is on a path of self-redemption. After a year of enduring, the community seems to be improving.

I may have a bias against Solana due to the "SBF effect." (I dislike SBF, so I find everything he promotes daunting, including Solana.)

However, I must admit that Solana is very resilient. Solana has its own loyal user and developer community.

Since February, Solana has achieved zero downtime—setting the record for the longest continuous uptime. This is something they can rightfully boast about. In contrast, Arbitrum has experienced several interruptions just this year. For example, in June, the network was interrupted due to a sequencer error.

Aside from SBF, Solana has a large "group" supporting them—Jump Crypto. It is worth noting that Jump Crypto is on par with Wintermute and Alameda in terms of "market making." Therefore, when SOL feels it is time to make a comeback, I expect SOL's price to rise unexpectedly.

This year, SOL's price has often remained within a certain range. The chart clearly shows that whenever SOL touches the lower range, it quickly rebounds.

Ethereum (ETH)

When it comes to prices not staying low for long, no token can compare to Ethereum.

Cheap ETH is always in demand. For example, during the recent crash, Bitcoin fell from $29,000 to $26,000, and Ethereum's price dropped to around $1,400-$1,500, but it only stayed there for a moment before quickly rebounding to $1,600.

Moreover, whenever there is a new "traffic explosion point" on-chain, ETH's price quickly rebounds with the increase in gas fees.

Ethereum has some liquidity issues because most circulating ETH is staked or locked in DeFi rather than on the open market. Therefore, recently, ETH has not shown much fluctuation, which can be a bit frustrating for traders and holders.

Conclusion

August has been one of the most dreaded months for the crypto market in years. Now that August is over, what comes next?

You need to understand that things will not stay at the bottom or the top forever.

Typically, the end of the year is a good time to start accumulating positions. That’s why I believe sharing this list of volatile tokens is a good idea. Because when the big market moves come, you don’t want to miss out on the (crazy) rise, as you will also miss the (crazy) fall.