People love airdrops.
I love airdrops.
You love airdrops.
We all love airdrops.
Free money.
Hip hip hurray!
The big problem with airdrops is that they are almost never worth it.
As far as markets are concerned, doing what everyone else is doing is very often the losing strategy. Because people love airdrops so much, chasing them becomes the losing strategy. We've seen this play out directly on Hive multiple times now.
The airdrop in question is usually worth so little that dumping during the middle of the hype cycle becomes way more profitable. Hive had a double airdrop snapshot on January 6th for Ragnarok and and SPK (Larynx) tokens. Now that the markets are up and running we see that those tokens can be bought for like 0.01 Hive. Because these airdrops were 1 to 1 this makes the calculation very easy. Theoretically these airdrops boosted the value of Hive accounts by 1% each, so 2% total.
But what if you had just dumped in the middle of the hype-cycle?
If instead of trying to get as much Hive as possible for the airdrop we had simply sold as much Hive as we were comfortable with in the $1.40-$3.40 range (DCA) during November, December, and January, we would have made a killing worth way more than the measly 2% that the airdrop was worth. Then with those profits one could easily buy as much as the airdrop as they wanted from other people that dumped after the market opened up.
The exact thing happened with CUB.
People stacked CUB for the Polycub airdrop, when really they should have sold when the market cap of CUB was over $5M (a consistent resistance point since inception). By avoiding that airdrop entirely and rolling it all into buying the deflationary xpolycub asset up front anyone could have x10 their money within a matter of days.
Yeah but that's just gambling, right?
Not really. The mechanics of these things definitely have a pattern, and whenever we have a chance to bet against what other people are chattering about, that's almost always the correct answer. People who talk about what plays they are going to make and are all hyped up and telling their friends... are almost always the exit liquidity that get dumped on.
My friend approached me about Shiba Inu on Discord and I told him not to buy. He bought anyway. Weeks later I checked that conversation in Discord and noticed that he talked to me literally the exact same day that Shiba Inu had peaked at all time highs. It's remarkable how well the market can extract value from people and turn them into exit liquidity right when it needs to.
My friend also wanted to buy that "Let's go Brandon" meme token that got rugpulled and crashed to zero and is now being sued. Luckily I controlled the money on that one and I was like "I'm not paying an $80 gas fee to buy a couple hundred dollars of this shitcoin". That answer was good enough. Bullet Doged.
I'll be the first to admit that I bought SPS for the first time at the peak of the hype cycle (80 cents). Again, should have been obvious when Splinterlands' governance token had a higher market cap the Hive does now... that maybe it was overvalued and guaranteed to dump. The hype was real, so I threw like $1000 in and lost most of it. Lesson learned: bet against the market. Bet against the hype.
Stability & Elasticity.
Unfortunately there isn't a single crypto asset out there that understands the importance of lowering the value of the token when it breaks targets to the upside. That's the only way to keep a currency stable, and crypto has zero stable currencies. "Stable coins" don't count, especially if they are pegged with dollars in a bank. Relying on the legacy system to pay up is not a valid long term strategy. That's the entire reason why crypto exists in the first place: there's no trust left in the legacy economy. A bank run will destroy all the stable coins pegged to dollars in a bank in an instant sooner or later. The perceived security of these tokens is a complete misnomer.
Algorithmic stable coins also do not count because they don't offer high enough yields to compete with the average gains of legitimate crypto assets. There's no reason an algo stable coin can't provide 100% APY year over year. If Bitcoin can do it, there's no reason a more stable asset can't do it as well. In fact just the property of the asset being more stable is a highly valuable variable that makes it worth more money to investors.
Stop timing the market: it's about time in the market.
This is another reason why algo stable coins with 100% APY will take over eventually. If anyone can enter the market at any time knowing they're going to make 100% returns after a year, that's a better investment than Bitcoin because Bitcoin only does that on average with massive volatility swings all over the place. In fact, a stable asset really only has to provide 50% APY to take over, as many investors would easily take that 50% cut for the free win. Investors like to make consistent gains, thus providing stability to an asset with high yield is an easy way to retain users and to eventually go viral. This "only up" nonsense is going to get laughed at in ten years.
Conclusion
Always bet against the market if you see an obvious opportunity to do so. It's usually pretty obvious because the hype in the air is infectious and you'll have to force yourself to not do the thing everyone else is doing. Have some self-discipline and do the opposite for once. You'll be surprised by the outcome.
In relation to hyped up airdrops the opportunity almost always arises a few weeks or months before the airdrop. Price of the underlying asset goes up right before the aidrop; that's when you sell. Buy back in weeks or months after the airdrop when hype is gone. This is a winning bet like 80% of the time.
At the end of the day things like airdrops create huge rifts in demand and supply. People want the airdrop, so there are way more buyers than sellers, pushing the price up and making the underlying asset volatile and unstable.
The market has a way of paying users who actually provide value to the network. Rather than do what everyone else is doing and hording tokens, provide liquidity to the market when the market needs it most. You'll be rewarded financially in the end on average.
We still seem to be a long way away from making these currencies elastic and stable. Be on the lookout for networks that finally accomplish this goal. It will be a big deal when it actually happens. With any luck and a lot of hard work perhaps I could build it myself. That's the goal anyway.
Posted Using LeoFinance Beta
Return from Betting Against the Market: Stop Chasing Airdrops to edicted's Web3 Blog
