Some Important Things to Know About Exchange Listings and Price Action in Crypto
With cryptocurrency, when a new coin gets listed on an exchange, you’ll often see some insane price action. Given this, caution is always in order when a coin gets listed.
Here are some important things to know:
- On some exchanges you’ll see absurd price action, but that price action will be limited to that exchange. This could be the price starting very high and then coming down quickly, or starting very low and then coming up quickly. It is an odd way for an exchange to handle a listing, but it is what it is, and it is common. Make sure to understand the price on all exchanges by using CoinMarketCap.com. It essentially never makes sense to pay more than a percentage point or two more for a coin on one exchange than another under normal circumstances.
- On all exchanges you might see a uniform increase in price leading up to a listing or upon a coin being listed. Again, make sure to check CoinMarketCap. If the price has gone up quickly, it is very likely to come back down. If you have feel FOMO and have to buy, consider averaging in, using a stop, or be ready to see lower prices while you HODL unless you plan on day trading and are hoping to get lucky. Prices sometimes do go up nice after a listing, but often the period in which this happens is very short.
- With brand new coins getting listed for the first time, there is no price history. Price discovery in the first week or two can be insanely messy! You are taking a giant risk buying at this stage, either wait for the dust to settle, or study the fundamentals and look for relatively low prices. Fortunes can easily be made or lost when a new hot coin gets listed.
- In all these cases, it is high risk to buy the coin upon being listed, but often a solid move to sell the coin that just got listed if you can sell it for a profit. Meanwhile, a day trader will often find opportunity in quick trades if they have the skills and can pick their battles wisely. The reality is, the excitement over a listing is almost never followed up by a major run, and that means long term investors and traders are bound for pain. Now, that said, in a proper bull market, or with the listing of a new hit coin, the rules can change. So you really have to do critical thinking and research here.
A good example that covers all of the above points is Bitcoin Cash (BCH).
When BCH was first listed back in fall of 2017 it jumped up to $500, fell to $200, then jumped back to $900, then fell to $300, then jumped to $4,000!
This part of the story tells us about a new hot coin getting listed and how important it is to time that entry!
The second part, the part where it gets to $4,000, that part is more a story of caution.
What happened here is that the idea that BCH would be listed on Coinbase turned into a surprise launch.
During the rumor phase BCH went from $300 to $1,750, and to be fair this was in a bull market and wasn’t just based on the eventual Coinbase listing. However, the jump from $1,750 to $4,000 was a Coinbase listing pump (read about that crazy story here).
The problem here is that BCH has been in a downtrend ever since being listed on Coinbase, it went from $4,000 to $80. That means anyone who ever remotely tried to time a long term BCH play got burned. It also means that only those who perfectly timed short term trades every benefited from BCH since that fateful day in 2017 when BCH was listed on Coinbase.
So, when we see a new coin listed, we really need to think it out and not FOMO buy/sell.
Often FOMO selling will be better than FOMO buying, but the reality is each listing is different.
If you have a good sense of which way the winds will blow and are ready to take a risk, keep that listing date on your rolodex. If you want to play it safe, stay away from coins when they get listed, far away and wait days, weeks, months, or even years for the dust to settle.