While fundamental analysis and technical analysis is important, especially in a cryptocurrency assessment, it is not the only factor that dictates the token’s value. There are other factors that evaluate the coin and give you some sort of a holistic review of where things are going for the crypto project itself. In this article, let us delve into the core of crypto’s fundamental analysis uncovering the driving forces behind coin pumps and dumps.
We will dive into the six lesser-known secrets behind it shedding light on the elements that can send token prices skyrocketing or crashing.
1. Influencer Endorsements
You will see this a lot especially in this space; the concept revolves around coins or tokens endorsed by famous personalities or influencers can surge based on the buzz created around them.
A notable case is Elon Musk’s frequent mention of Dogecoin and that resulted in significant market movement. When he was on Saturday Night Live (SNL) back in 2021 DOGE itself was explicitly mentioned and the price tumbled after Musk joked about it.
Currently, the recent trend that we have been seeing is some influencers have been promoting friend.tech highlighting potential gains and that is something to be cautious of when looking into sort of an endorsement to that case.
A cautionary tip — research carefully before following any influencer’s advice as some endorsements may be undisclosed promotions or questionable projects.
2. Narrative-Market Strategy
The second concept revolves looking into what is happening with the narrative within the market sentiment. These are trending ideas, stories or beliefs that shape how people perceive and value cryptocurrencies.
So if you were to ask the general public a few years ago during the bull market, people would say things like “this is the future!” or “it’s going higher!”, but nowadays people are very bearish about it.
Undeniably there are a lot of positive developments that are happening on an institutional level but on a day-to-day perspective, if you ask the retail investor — mostly are bearish. Especially in the 2018-2019 bear market where that was also a time when many people thought this sector is pretty much dead and it is very close to being so due to the negative sentiments of people perceiving what cryptocurrency could be as the intrinsic value.
3. Impact of Cult Leaders on Cryptocurrencies
These are individuals with a devout following and they can make or break a coin’s value on mere opinions. So just by simply speaking or by saying something it will affect the rest of the market.
Some notable mentions certainly were in 2022 with Sam Bankman-Fried and also Do Kwon’s Terra LUNA situation — the both had had a lot of notoriety on X and with the whole FTX situation, SBF was tweeting all the time and that was creating a lot of volatility in the FTX’s native token.
Therefore, “cult leaders” are people who have a cult-like following and the followers would blindly trust whatever the cult leader says. Such people are compelling or persuasive during bull markets but then they are also blinded by greediness as well.
4. Utilizing Ecosystem Investment Strategies to Determine Cryptocurrency Value
Grants and funds dedicated to specific cryptocurrencies’ ecosystems may affect the desirability and perceived value of associated projects.
As you may have noticed Layer 1s and Layer 2s often launch to bootstrap their projects to get the teams to build and thrive within those ecosystems.
So a prime example of this is BitDao’s $200 million Web3 ecosystem fund that was causing a lot of chatter in the market in February 2023.
5. The Power of the Crypto Community
A supportive and engaged community plays a critical role in a crypto project’s success and expansion, driving demand and value.
When you have a look on X, Crypto Twitter (CT) is sometimes an amazing place to be a part of. The power of that community will make or break a coin; and usually in some cases, they could be super engaged and supportive but also can be super cult-like as what I have mentioned earlier.
6. Utilizing Marketing Tactics to Promote Cryptocurrencies
Good marketing campaigns can play a massive role in boosting a coin’s desirability.
Tactics to Watch:
- Meme Marketing
- Ad Campaigns
As an evaluation tip — it is always good to look into what is behind the project; ask yourself if they are here for good reasons and that they want to create value within the space.
These are the six secrets on why a cryptocurrency pumps or dumps and we do hope that you got a lot of insights from this article.
So in your crypto journey you can consider these factors in investing with confidence. If you really want to make it in crypto then you have to educate yourself even further; read, research, understand how it works, learn how to trade or invest and there is a lot of free educational material out there like this one!
Frequently Asked Questions (FAQs)
Endorsements from widely known figures or institutions may cause a temporary rise in crypto prices by increasing investor confidence and attracting new capital into the space. This is also true with negative sentiments or regulatory scrutinies creating the opposite effect.
Communities represent the user base of the ecosystem surrounding a particular digital asset — size, engagement and sentiment alone influences investor perception and adoption.
A well-thought of marketing strategy can deceitfully create hype and attract new investors. This is why investors should be cautious of overly aggressive marketing tactics as they can often lead to pump-and-dump schemes.