Red Flags in the Altcoin Space: Tokens Plunge Over 40%

In the midst of the bearish trend affecting the altcoin market at the beginning of the new year, a crypto analyst has identified a notable pattern in the downward movement of certain tokens within a specific category.

In a recent tweet, VIKTOR, the crypto analyst, drew attention to an insight from the market turbulence on January 3, humorously referred to as “liquidation day.” VIKTOR highlighted that while most altcoins saw a substantial downturn of around 30%, he observed a distinct trend among specific tokens that experienced even more significant drops.

Specifically, VIKTOR pointed out that high-profile coins like BIGTIME, Pyth Network (PYTH), MEME, TOKEN, Worldcoin (WLD), and Jito (JTO) displayed substantial red candles with declines exceeding 40%.

According to VIKTOR’s analysis, what distinguishes these tokens is their shared characteristic of being relatively new to the market, combined with their high full diluted valuation (FDV) in relation to their float.

VIKTOR’s observation suggested that these tokens were more susceptible to pronounced market fluctuations, as evidenced by their sharper declines on liquidation day. When asked for further clarification on the factors contributing to the observed sell-off, the analyst suggested that short-term holders might be looking for quick profits from these tokens.

Furthermore, VIKTOR pointed out that the absence of a substantial price history for these new coins could also be a contributing factor. Market participants lack a clear reference point or fair value for these assets.

Additionally, another user, X, highlighted a peculiar characteristic shared among the tokens BIGTIME, PYTH, MEME, TOKEN, WLD, and JTO. The commenter asserted that these tokens have a more significant presence in perpetual contracts compared to spot holders.

This observation aims to emphasize that a substantial portion of the trading activities for these tokens is concentrated among market participants speculating on their price movements, rather than those who actually own the assets.

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Disclaimer: 

This blog is for educational purposes only. The information we offer is not investment advice. Please always do your own research before investing. Any opinions expressed in this article are not a recommendation that any particular cryptocurrency (or cryptocurrency token/asset/index), cryptocurrency portfolio, transaction, or investment strategy is appropriate for any particular individual.

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