Doubling Down On Beaten Down Alts?

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26 Feb 2024

When The Market Gives You Lemons
The great thing about a bull market is that a high tide tends to lift all boats. However, there are those coins that only manage to experience rather modest gains. These are often the coins that never manage to revisit their previous all-time highs, and as a result, often sail off into oblivion. Knowing when a massive correction is an opportunity, as opposed to an exit signal, can be a rather tricky endeavor. That being said, a decision still needs to be made.
Many investors find this particular scenario too difficult to face, and so usually fall into the camp of passivity. They either sit on losers until they are entirely worthless, or they miss out on an amazing opportunity to add to their holdings at a heavily discounted price. Either way, they missed out! It’s important to reassess one’s holdings from time to time, unless of course you are exposed to blue chips.
Essentially, blue chips will always increase in value over time. Their gains will perhaps be less attractive. However, they will be sure… or, as sure as it gets in the world of finance. Objective analysis is of course imperative, otherwise, the entire exercise becomes somewhat futile. Establishing whether a project is still relevant, and has the user base to warrant additional investment is of course paramount.
Red Flags
I have conducted copious amounts of research over the years, and one of the most obvious signs is a breakdown in social media presence. When a project hasn’t posted anything for months on end, it’s safe to say, it’s not going anywhere. When the team abandons a project, it’s pretty much done for, apart from a miraculous resurrection. It’s one of the quickest and easiest ways to gain a “health check” on any particular project.
Another important aspect to consider is if the correction is in line with a broader market correction. A project that is dumping while the majority of the market is pumping, is a concern worthy of additional research. Projects are sometimes struck by bad news, or some type of exploit, so, establishing whether or not the wound is fatal should be the key objective in such a scenario.
The loss of investor confidence, as a whole, is also a concern. Why are long-time community members abandoning a project? The market has a way of assigning an undisclosed “incubation period”. A project that doesn’t produce the goods during this period is given notice in favor of more promising alternatives. That’s just the way it is. If you begin to see a mass exodus, regarding users/investors, you need to consider that perhaps, time is up.
On the other hand, it’s also important to note that micro-caps are often unfairly punished by the market. When there are no clear indications as to why a project is collapsing in value, it may well be an opportunity. However, this deduction must be based on data-driven research, and not just an impression. Even in such a scenario, a positive outcome is not guaranteed. There are no easy decisions in this game. They all come with both risk and cost.

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Final Thoughts
Investment capital is like a precious seed. Investors need to avoid squandering their seed, while simultaneously, making good of the opportunities afforded by the market. At the end of the day, research is key, as it always is, and so diligent investors tend to have a higher success rate when it comes to identifying great opportunities in the market. At the same time, they are also better able to identify potential disasters.
Many see investing as a passive endeavor. This is perhaps true of TradFi. However, in the Crypto sector, things change fast. It’s an industry that is still being established, and so is susceptible to sudden, and even, irrational adjustments and innovations. This can sometimes disqualify certain projects. It’s a tough game, but one, well worth playing. All the best! See you next time!

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Disclaimer
First of all, I am not a financial advisor. All information provided on this website is strictly my own opinion and not financial advice. I do make use of affiliate links. Purchasing or interacting with any third-party company could result in me receiving a commission. In some instances, utilizing an affiliate link can also result in a bonus or discount.
This article was first published on Sapphire Crypto.