The Next Alt Coin Crash Will Be Brutal

in LeoFinance2 months ago

Hey Jesspeculators

I hate to sound like the wet blanket and pissing on everyone's parade, but corrections, let's talk about it, shall we?

I know we're all flying high and will probably continue for a few more months. It's easy to get swept up in the hype and think these times are normal, but we have to remember that bull runs are the expectation, not the rule of crypto. I actually prefer bear markets, but bull runs have their own charm, don't they?

I tend to look to the future to prepare for what comes next instead of getting wrapped up in the now. I used the last 4 years to stack positions and prepare for the bull run, and I'm using this time to prepare for the possible bear market we may see once all these froths over the top.

  • As Bitcoin makes new highs as it tends to do every halving cycle, it drags everything tethered to it up too. You see, as Bitcoiners get rich, they look further out of the risk curve for more opportunity.

  • As normies think they're priced out of Bitcoin, they move towards things that they can afford a whole one of, falling for unit bias.

  • As it takes more money to move Bitcoin up in value, speculators go down the list looking for illiquid coins to move.

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Lack of liquidity

The reasons alt's pop is because of a lack of liquidity, it only takes a few million dollars or a few 100 BTC to flow into an alt, and we see price pumps that suck in more people as they watch a coin go on the run. The thing is, those who gobble up the liquidity early on have an issue where they could be stuck holding the bag and have to divest as the price moves up to lower their risk.

If everyone moving up begins to sell and sell too hard, you quickly see them exhaust the buying, and prices drop like a stone.

Lack of short-sellers

Since altcoins aren't as established as BTC the financial markets, there aren't very many short sellers around. People are shorting BTC as we speak, and if it were to correct, they'd be the ones providing a floor to exit their positions.

In alts, no short-sellers are providing a floor. The floor is 0.

Margin calls

As I mentioned earlier, alts can move at wider spreads; 10 - 15% in a day is normal. But crypto traders aren't happy with just bagging a 10% gain, especially when markets are hot, so they lay on the leverage. Leverage is great when the markets are going up, but as soon as they reverse, the margin calls will liquidate many traders in a matter of days, forcing alts down faster.

Collateral calls

The lending markets have also become popular. While BTC has been the primary lending asset, especially to capture the contango trade going on now, alts are also establishing lending markets. As these are new products, there will be ALOT of inexperienced people using them. They'll lock up their alts to try and get a loan, and when the correction comes, they would need to post additional collateral to maintain the loan.

As the coin keeps falling, they need to keep buying to maintain the collateral position. Many will give up and have their positions liquidated, putting further pressure on that coin.

Fund rebalancing

Since there are now institutions getting into Bitcoin, they've already decided on an allocation, be that 1%. If BTC falls, some of them will be forced to buy more to maintain that 1%. Alts don't have that luxury of fund rebalancing floors forced to catch the falling knife.

Weak hands in retail and corporate

Many people talk about diamond hands now, but it's easy to hold on when the price keeps moving up when the price crashes are when diamond hands are forged. Their amount of new retail investors coming in for the first time with paper hands is far larger than before, especially in the alt market.

Let's also not assume that corporate investors holding altcoins are there to hold for the future or have diamond hands to make money for their LP's. They'll get scared and dump their alts way before they start dumping their BTC.

Rug pulls, exit scams and NFT's

Then we get to the good old scams and rug pulls plaguing DE-FI; it can and will happen, OVER AND OVER. People never learn; there's always a new band of suckers willing to fall for the 1000% APR marketing before getting the rug pulled.

Then with NFT's, I know the market seems hot now, but wait till liquidity draws out of ETH or WAX, and we'll see who is providing a floor to buy these so-called NFT's. This is a speculation and tax play, and it won't take much for this market to dry up, and people will sell their NFT's for next to nothing to get out.

Bitcoin may fall, but alts will fall harder

Many people getting into the space now have never seen an 80-90% drawdown in value; they've never seen the bottom. So these bullish posts and narratives I tend to smirk at, these people have no idea what's in store.

The higher alts go, it only means the harder they tend to crash, and there are very few people with the conviction to hold onto alts so that the dips will be seriously violent. It can and will put projects out of business; as we saw in the ICO phase of 2017, how many of those ICO's are still around?

Once the market pulls the rug, we will be Wile Cayote and think we're still on solid ground before the drop.

Wile coyote
Image source: vox.com

I'll be here watching it all unfold, and man, is it going to be a fun ride? I hope many of you would have taken profits by then.

Have your say

What do you good people of HIVE think?

So have at it, my Jessies! If you don't have something to comment, "I am a Jessie."

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Great article that explains the difference between the markets and why they behave as they do. I hadn't really understood that before.

I actually prefer bear markets

Me too. My DCA order on bitcoin last Sunday didn't get filled and it just keeps going on. I struggle to buy when the prices are rising. This is my 4th attempt at DCA and I might be about to fail again. 😂

As normies think they're priced out of Bitcoin, they move towards things that they can afford a whole one of, falling for unit bias.

That's me although I don't tend to buy. Just waste time looking. 😂

when the price crashes are when diamond hands are forged

This is possibly the only part of this crypto lark that I'm good at! 😁

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Lol indeed people like to lump all tokens in one but they're very much different, comparing Bitcoin to an alt to me is like comparing a US government bond to venture capital, they are completely different.

Lol I've been Daily cost averaging for 4 years now and watching my order bring in less Satoshis each day makes me really sad but what can you do? I can just get on board and keep stacking. If theres one thing I know about BTC it always looks cheaper when you look back 4 years so I don't want to keep repeating that same mistake lol

You're earning crypto so why do you need to buy alts? I also earn alts, and bought alts stupid cheap back in 2018 so I never needed to buy again, they just my speculative plays. All I do is buy Bitcoin

Keep HODL'ing lol its good fun

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You're earning crypto so why do you need to buy alts?

Not sure I do but I had a few on my list last November that I meant to look at and never got around to that I wish I'd bought now. RUNE being one of them.

However, the more you own the more there is to keep track of.

My excitement for the day is I think I've just worked out how to get 10% interest on my fiat, using the TGBP stable coin, if I tie it up for 3 months. 6% if I want it liquid. Not huge amounts for the LP providers amongst us but that's pretty exciting to me given most of my bank accounts have gone to 0% interest.

I'm slowly, slowly learning how to make my crypto and fiat work better for me and I'm thrilled with that.

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very interesting and informative article, thank you for sharing

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The bull that’s going on right now keeps biting me in the ass. I’m trying to swing trade so I can inch closer to the full bitcoin before I can relax and get the hell out of trying it. I need to stop doing it altogether but it’s tough. Thankfully it’s just with small money but still annoying. I want to be able to just put in the rest of the money needed to get me there lol. Funny part is, I could, like everyone around here, have bought a bitcoin or two a year ago and he sitting pretty. Hindsight though.

It will be comical when this NFT trash collapses completely. There’s too much hype for some stupid shit with NFT’s. It’s not like it’s really even that cool to own. Just a bunch of random letters and numbers that other people can look at.

LOL you're a braver man that I, I cant trade for shit I'd just lose money, so I stick to what I know, dollar cost average, HODl, earn staking and interest rewards, convert to Bitcoin HODL some more.

I do want to be able to spin off some alts into stable coins one day and at least take my principle off the table, then I know its just about getting more BTC for the rest of the run till it all corrects, then another 4 years of picking alt coins I think will moon and throwing a $50 here and there, rinse and repeat

Till the next run

Lol oh wow a unique hash with a barcode on the blockchain refereeing to. jpeg, hmmm totally the same as an autographed card or photo in some peoples eyes, I don't get it. But hey dumb money runs the market

Hopefully, we'll play it smart. Until then - ape mode on! :D

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Lol still a bit longer to go, so ape on! We're going to have a lot of fun this year

Oh you crashed the alt dream lol. There is a lot of truth in what you are saying, but many feel quite euphorical right now. It is the same with the NFT. I mean it is very ok to dip your toes in everything, but it takes experience to know when the water starts boiling 😂

LOL I know right Im such a wet blanket screaming my little head off and pounding the table but who cares what I say when the charts are green? What people don't get is that I am also benefitting from alt coins, if a project blows up that value consolidates back into BTC lol so I'm always winning. Have fun selling your NFTs and buying random coins, ill be the one saying I told you so, and will take great pleasure in it.

I was suckered into the race too back in 2017, wont make the same mistake again, ill make new mistakes lol

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Experience always adds up. I guess that it is only natural to want to store value in something that lasts. It is about the fundamentals behind the coin. Some have it, some don't

I put it down to maths a subject most people hated at school, when I see abs speak to people in Bitcoin they get the math pretty quickly. As the math continues to play out and no one can stop it, the rest will build a narrative bridge that makes sense for them

Lol who knew maths would eventually pay off for me

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Are there a handful of assets like BTC and some other alts that you feel offer some stability even in a bear market? Do you just suggest moving money into true stablecoins? I have some BNB that I am sitting on. I plan on holding out for a couple of months, but I am wondering if eventually I should move that into like BUSD or something to prepare for the bear market.

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I don't see much institutional appetite for other coins perhaps ETH yes, BNB is pretty centralised so Binance can control supply and maintain some of its value better than alts without backing of someone as massive is Binance

As for the rest I can't see where the buyers come in to provide the floor if retail pulls the plug. Naturally BTC's new floor price will help provide some additional liquidity once we overcorrect to the downside but yeah I can't see many holding value so stable coins are going to be a haven for many alt coin speculators

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Thanks for the input and insight! Now I just to make sure I time my moves correctly!

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Great analysis, you know a lot more than I do on the technicals. Yes, the question for most of the market is not if, but when. My Alt position is small but obviously has exploded last few weeks. I really don't know when to start pulling plugs,,, will move those into a stable coin. Like most people i've been edging in more and more to crypto last few weeks.

I think anything between 3-5x returns is a sell you're just being greedy and pushing your luck otherwise. Sure if you really deep in the shit coins you can do 100x and all that but yeah that to me is just plain gambling

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In absolute agreement with you, that's why you either have to have a very long term strategy (with a real quality project) or convert your earnings into Bitcoin or Stablecoins. NFT's stink, I agree with your take that they may soon see a huge drop in market backing. Only time will tell!

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exactly, how many people are really in that alt to see it do anything, they are in it to see it increase their fiat value so they can sell it. if so many investors have that attitude you'll see massive draw down. As for Bitcoin, people just don't want to sell it, and fiat well yeah you can go get protection there

I think we'll see crazy highs in alts and it will suck people in and then rip down like 90% if not more

LOL, if you're spending money on a token that's only function is referring to a jpeg, then you deserve to lose all your money

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I completely agree with this. That's why things like NFT's and Doge coin drive me insane. I hope that more people can see what has utility and what is a fad or even a joke.

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I completely agree with you and I think you listed all the reasons why. This is why I try to only invest into coins that have good fundamentals or value in the future (if nothing wrong happens). If I do happen to like a chart but not the coin itself, I will come in with a plan with where to take profits or take losses.

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I think altcoins can bring you massive gains but the amount of risk you're taking is insane, I hear so many people ditching Bitcoin and going all-in on alts and it may pay off for some, but a lot of people don't realise there is no floor on these things they can drop badly.

Always good to deleverage and take some profits so you don't have to force sell and recover later

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Yea I don't think its a good idea to ditch BTC and go all in. BTC is by far the safest bet on crypto even if it won't go up by the a huge percentage when compared to the alt coins.

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That's where I think people misunderstand how these things work. Let's say HIVE moves up to $50. How many buy orders and buy pressure will keep it there?

So you may have 10 000 HIVE you're never going to realise that price with your whole stack. SO if you sell, you think you're going to get $500 000 when in fact you tank the market unless you keep trying to match buys until you get out which normies don't do they spot trade so slippage is massive

With BTC there's much more robust order books and you can get in and out at million-dollar levels without moving the market

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Yea the liquidity problem is a big problem. I think its much worst if you consider it in LEO as they are constantly burning tokens (especially after CUB was released).

As for people stampeding out, its the entire reason why the stock market crashes hard. Because those hedge funds are the first ones to run out so they won't hold the bag.

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I don't see bitcoin falling as hard as the last few times around since the people buying up large amounts don't need to sell. They won't panick if it moves 50% either way and other people will see an opportunity down to 30k as they know that other will pounce when the price goes low enough.

Alts however are mostly a bunch of shit with no real purpose or use case. I hold about 50 but there are only about 5 that i would hold long term and the rest are hoping for profits. I will take profits and have taken a few to date but it's hard when the markets are riding high. It would be great to sell near the top and buy back in next year when the markets are down. Load up on hive, bitcoin, link, telos, bnb and maybe one or two more. Everything else is for sale.

Oh if hits 30k again I am jumping in big-time lol we're going to 500k regardless so anything below that is fair game in my book! Earning crypto and making positions in alts is cool to help you perhaps swap out for sats and stable coins when you reach a nice exit value but it's actually a lot of work.

For me, I am happy to work and just earn a salary and convert as much of it as I can to Bitcoin. I just want to keep it simple, trying to trade this shit is a full-time job lol

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I agree with you.

Are you holding any alt coins? Whats your game plan for this current bull run?

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thank you very much for the article,have a great day and good mood

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