Regardless of any project, they all follow the pump and dump process to help the Project Owner, Market Maker, Exchange, and VCs find profits by selling tokens. As a small retail investor, the amount of information we hold is limited compared to the big boys, so we need to identify our position correctly.
Everyone in the market aims to find profits and benefit themselves, leading to FOMO buying, causing the price to spike. At this point, everyone will feel “happy and satisfied” because they think they are making a profit, and everyone’s “selfishness” is the “selflessness” for all, and everyone wins together, right?
Is that really the case? No, this is a zero-sum game where profits are distributed among investors, and no one profits or loses until they sell. Those who buy at the top are the LIQUIDITY for those with a good position to DUMP, and the market is made up of buyers and sellers. Therefore, take responsibility for all your decisions, don’t listen to rumors, and learn how to TAKE PROFITS FROM A PROJECT or AVOID FOMO BUYING to avoid being a liquidity provider for others.
Take profits when others are FOMOing
The most “The stock market is born in gloom, grows in scepticism, matures in optimism and dies in euphoria” – Sir John Templeton
Firstly, it is important to distinguish clearly that TOKEN/COIN is not a PROJECT. Token only has a PRICE and VOLUME that can only go up or down, there is no good or bad, only buying at the right time and selling at the right time, and the level of expectation must be appropriate for the market situation. During the uptrend, the target can be X2 X3 X5, but during the Downtrend, a 20%-30%, 50% rebound is already good enough.
Choose to learn about TOKEN/COIN with value, supported by the community, and have a market maker to push it up. If you buy a coin that you know nothing about, it’s like reading a word without understanding anything.
Buy when the market is gloomy with little news, no one is excited to invest anymore, choose coins that accumulate sideways volume decreasing (called tightening supply). Buy from those who are bored, sell to those who are eager… however, you should try a little capital because it takes a long time to bury your capital, or use TIP to accumulate waiting for a breakout to buy in.
Know how to hold on to profits when the coin is already in a wave, good news, high expectations, that’s when hope needs patience and caution, and separate yourself from the crowd.
Sell when the crowd is excitedly discussing, news is abundant, everyone knows, everyone is satisfied, and there are signs of distribution.
Take a quick look at Facebook, Telegram, Twitter, Tiktok groups when you see the majority of KOLs bragging about profits, especially close friends who have posted a STORY mentioning the token they are holding, then stop for about 3s, “FEAR when others are greedy”.
Closing positions based on Volume and Market cap
TIP: When the price has increased significantly, reached at least 3 bases, over a period of more than 2 months and the trading volume is equal to or greater than the market cap, it is a liquidity area to close positions, meaning it’s time for distribution.
Let’s analyze some projects to close positions based on my personal experience:
The ADA Boom
ADA is a case study of the first platform altcoin, when it surpassed its 2018 peak and increased from a low of 0.017 to nearly $3.1, nearly 300 times its value. At its peak, it had the following characteristics:
The ADA price rose higher in line with the Alonzo hard fork, launched on September 12, 2021. It started to gain momentum when all news outlets reported on the upgrade period from May 2021 and ADA reached $1 for the first time.
The average daily trading volume of ADA was accumulating, with a bottom range of around $30-100 million per day, but it increased to a maximum volume of $12 billion in May and $9 billion in September, with a market cap of around $60-90 billion at the time.
Therefore, the trading volume also increased 100-300 times in line with the price increase. And a coin that has a trading volume of over $10 billion per day means that $10 billion is being bought and sold, so is this the area for market makers (MM) to close positions, because who would be foolish enough to spend a few billion dollars to push up the price (when the MM has already accumulated when it was only a few million per day)?
I remember many KOLs at that time began to sing praises of Cardano, entering the ADA community, claiming that it had superior technology and would be a killer of Ethereum, boasting about their profits, and targeting $10 after buying at $3, but then they also disappeared without a way back even when BTC reached its peak in November 2021.
This makes us think of the upcoming upgrade event of The Merge of ETH, which may be just a trick for MM to push up the price of the Ethereum ecosystem, especially for L2s like OP LDO or mining coins like ETC. After releasing enough news and causing the FOMO crowd, it’s also time for big players to close positions, and if The Merge is not successful, many funds have prepared positions to short ETH. So, many of you ask if hodling ETH at this time is possible during the downtrend when it has pumped from $1,000 to $2,000 (while being the second-largest coin in the market with a market cap of $200 billion, then it’s no different from providing liquidity for MM).
Recently listed token on the exchange $C98
When C98 successfully raised funds from Alameda and many other VCs and then had an IEO on Binance Launchpad, the community at that time was extremely FOMO, and the price pumped up to $1.8, dropped to the $1 range, and accumulated for about 2 weeks. Many Vietnamese KOLs turned their backs on the Vietnamese project (labeling it as a scam), and the price started to rise in skepticism. Within a week, it pumped from $1 to $6, leaving many people missing out.
But the volume at the bottom of the sideways range was about $60-100M, and when the price reached $6, the market capitalization reached $1B, and the trading volume reached $1-2B. Calculating it yourself, the amount of floating supply outside is almost TRADED HANDS by large volume buying and selling, double the market capitalization, which is the LIQUIDITY range for MM to take profits rather than accumulation range (still the old saying that no one is foolish enough to invest $1B to push the price).
At that time, many articles were published such as “VIETNAM UNICORN,” but many community members in Vietnam, including myself, did not die because we bought C98 at $6, but rather DCA when it was $3, $2, $1, $0.5, and now it’s just a tiny profit left. DCA when the price drops is a lesson that the more enthusiastic and passionate you are about the project, the more you choose the wrong way, no different from “digging a hole deeper while standing in it,” and it’s clearly difficult to get back to shore.
Lesson: Separate the general psychology of the crowd, when it has already pumped to take profits, it is very difficult to pump again for the next generation to get back to shore. No matter how good the project is, the token generated is mainly for buying and selling, rising and falling, not good or bad.
Trending token $RACA
RACA is a legendary token and a scam that targeted the Vietnamese community during the 2021 uptrend season. Many people have had their lives changed by it, especially KOLs, but many others have lost their homes because they bought in at the peak and could not sell it.
RACA started as a Memecoin and was then endorsed by Mother Elon Musk as a representative image, with an AMA with CZ in October 2021. Its price was pumped x100 from the bottom within just one month.
After that, it shifted to the gamefi trend and metaverse, becoming just another game. Within a month, it launched Metamon, and immediately the price of its NFTs and tokens surged. Many TikTok videos advertised investing 1 billion VND in Metamon and earning 100 million VND per day. Many young people got to know about crypto, gamefi, and changed their lives thanks to it (moving from the city to the countryside, or living under a bridge).
Returning to the profit-taking issue, in November 2021, RACA was a top candidate to win MVIII and had a high chance of being listed on Binance (this was a rumor-based buy/sell strategy).
During normal trading, RACA’s volume fluctuated between $10-50 million. When it was pumped x3 in just two weeks, its volume reached $500 million, and its market cap reached $1 billion (while it was not yet listed on major exchanges such as Binance or FTX). Many transactions were carried out by bots on Pancake Swap to create such a high liquidity level. Many left-hand wallets sold and right-hand wallets bought to maintain RACA’s price and sell it later.
In reality, what happened was that at that time, the RACA community’s admins kept posting DCA forums, preparing for “BIG NEWS.” But in reality, they knew that Mother Elon Musk had canceled the new PR representative contract for RACA, and the token was dumped when the big players took profits and needed liquidity. Many people then shouted DCA.
Lesson: Do not listen to any investment advice from anyone, trust yourself, and take responsibility for all your decisions because the nature of the financial market is a money game, and there is no free lunch.
Buying LUNA the Dip
LUNA is a pioneering project in algorithmic stablecoin, but there are inherent issues with its burn-mint mechanism. To mint UST, a corresponding amount of LUNA must be burned, and vice versa to maintain UST’s price at $1. In theory, during an uptrend, by stimulating demand through an APR of up to 20% per year on ANC, minting UST will increase (there was a time when UST reached a market cap of over $18B), resulting in a corresponding burn of LUNA (reducing the LUNA supply and potentially increasing its price, reaching a market cap of up to $80B). This is the best-case scenario.
However, during a downtrend, people tend to withdraw to fiat, causing UST to be sold, resulting in an unlimited minting of LUNA, leading to the collapse of the entire empire. (In addition, working with stablecoin affects the interests of traditional forces, including the Fed, the issuer of USD, and a collapse is inevitable.)
What happens when LUNA falls? The supply increases to the point of over a billion coins minted per day, while some exchanges block withdrawals but allow unlimited deposits. Many people buy the dip without understanding what is happening.
Daily trading volume is $1-2B (out of a total market cap of $40-60B). When it drops uncontrollably, trading volume can surge to $10-15B (some sell to take profits, while others panic sell or buy the dip with $10B, resulting in a loss).
In summary, a sudden ten-fold increase in trading volume can occur in two cases: profit-taking and panic selling. If this trend continues, there may be a liquidation of liquidity areas, where the candle wicks left by BTC often have high trading volumes, but it is best to avoid trading in these areas.
Tips taking profit with OP
At the accumulation bottom zone, the market capitalization of OP was around 70 million dollars, with an average trading volume of 30-50 million dollars, only trading 20-50% of the circulating supply. By July 28, 2022, the market capitalization of OP reached 350 million dollars, and the volume reached nearly 700 million dollars (twice the market capitalization).
Therefore, the amount of tokens floating in the market has been transferred, indicating that it might be a liquidity area for market makers to sell off, then the price will be pumped up again and phased towards the demand side. The market makers hold the price to liquidate enough holdings, while the trading volume still remains ten times higher than normal, and with the market capitalization doubling, it is determined to be a profit-taking area.
Profit-taking based on Technical Analysis
Combining divergent RSI and Fibonacci extension on the D or H4 timeframe (TIP profit-taking is mostly based on this).
This requires relying on experience, learning knowledge, and personal experience, and in terms of technical analysis, it’s just a probability system.
If you use it to trade 100 times as if it were 1, and then sit down to tally the win rate, risk: reward ratio, you can determine if the system is trustworthy enough to use or not.
I will discuss technical analysis in a more specific article because it is easy to access, such as drawing fibo or x10 from the bottom, easy to learn, and easy to use to manipulate inexperienced traders, but few people really understand and use it consistently. Many people jump from one thing to another, then criticize the old one, and whenever they see someone analyzing charts, it’s like lighting a candle at a shrine because they can’t make money. But in reality, with MASTERS, they all have their own trading system, which is a foundation to fight the market, extremely important.
This takes time to build and cannot be done in one or two sample examples, drawing beautiful historical charts. Therefore, I will address it later, and I hope you all look forward to it.
Profit-taking based on On-chain
Guide to track MM team’s Smart Money onchain
Step 1: Choose a project to follow Following the footsteps of funds: First, list out the VC funds to follow, including: Coinbase Ventures, Binance Labs, Andreessen Horowitz-a16z, Alameda Research, AU21 Capital, NGC Ventures, Jump Crypto, Digital Currency Group, Paradigm, Multicoin, Pantera, Framework Ventures, Draper VC, Polychain, etc. Then you can follow the funds’ Twitter. => Access Cryptorank => Select the funds section => View the list of projects that funds invest in
=> Take note Details: https://www.facebook.com/groups/ryanvanhungnguoiban/permalink/420197360260648/
Track on-chain of smart money TIP check wallets of large organizations (Funds) Free Tool on @etherscan
- Create an account on @etherscan
- Go to More -> Tool -> Label -> Type Fund -> Account -> Balance (follow the large value to small)
- Follow wallets of Funds: Whales, MM,..to swim with the money flow => copy the wallet addresses into an excel list, or use the app.depocket tool.
Use Twitter => Find the project Follow reliable Western and Chinese KOLs,… by checking their history, especially their style:
- If they only call low-cap, shitcoins for FOMO pumping 20-30%, be careful, you can surf and fall.
- If they call the trend of AI, LSD, DEX (Defi), Social, Bluebird, ZKPs,… => Then worth following, checking their entries to verify the results => Filter out KOLs to follow When any token, coin appears => then search it on Twitter to see if many people are mentioning it => Check the FOMO level of the community shilling it => Filter out trend-leading coins with beautiful volumes.
Step 2: Check on-chain, follow reputable Whales wallets (Smartmoney)
- Check Smartcontract (erc, bsc,.. scan) => Go to the holder section If there is a nansen account: it will be checked faster Check each wallet>1M$ to see when they accumulated from by selecting the wallet => then click on the token => view the analysis => if the amount increases, the accumulation is likely
- Copy all of those addresses, create a watchlist on Depocket Check its accumulation date on the chart from which day. Example: My MASK Whale watchlist I follow here: https://s.depocket.com/5GA8CX => The job is to check each wallet to see when it accumulates, whether the coin accumulates or not, or whether it starts to dump.
Step 3: Create a watchlist on tradingview/Tabtrader: Check the chart + Volume Classify into
- Launchpad/AI/ZKp/Social/L1/L2/New Listing/shitcoin on tradingview to check which token increases
- If the price increases + Volume increases => The accumulation is beautiful => Worth considering
- ACCUMULATION TIP: https://www.facebook.com/groups/ryanvanhungnguoiban/permalink/479410964339287/
- If you see the chart pumping and dumping like crazy => be careful, that’s just a FOMO wave => filter again
Step 4: Create a watchlist and set alerts on Depocket and Tabtrader
- Use Tabtrader/Binance app to set price alerts. => Accumulate at support levels, adjust prices with low volume
- Use Depocket => Set alerts to track the signals of the sharks (read the instructions on app.depocket, I will have a post on setting alerts with this tool)
- Wait for money to flow in
The mentality of following the sharks is very important, making oneself always trust in the chosen method, swimming with smart money, investing with peace of mind, and the results require time to verify.
I will take the example of Mask in this article for everyone to imagine: with Dev China+ Backer Exchange is Binance + MM is Jump already accumulated + Kols is Elon Musk => It accumulates goods beforehand and waits for Elon to do something before legitimizing it as a pump.