In cryptocurrency, there’s a common misconception that often leads to confusion when new coins are launched. You may have seen a coin’s price surging by thousands of percent (for example, "VANA up 2400%"), and it can be easy to think that some early buyers are making massive profits. But the reality is quite different from what’s often portrayed on trading platforms.
Let’s dive into how these percentages work and clear up the confusion!
1. The Launch Process: Three Key Prices
When a new coin is added to a major exchange like Binance, it doesn't simply appear out of nowhere with a fluctuating price. Before the coin even starts trading, the exchange sets three key prices:
Opening Price: This is the price at which the coin starts trading when it is listed on the exchange.
Low of the Day: The lowest price the coin reaches during its first trading day.
High of the Day: The highest price the coin reaches during its first trading day.
These three prices are vital in understanding the price movement and the percentage increases you see.
2. ICO or Launchpad Price: The Base Price
The Low of the Day price is often linked to the ICO price or the price at which the coin was sold during its initial offering or launchpad event. This is the price that early investors—those who participated in the ICO (Initial Coin Offering) or bought tokens during the launchpad phase—purchased the coin at.
3. The Opening Price: Where Trading Begins
When trading starts, the Opening Price (like $21.79) is the price where the coin starts to actively trade on the market. This is where new buyers come in and actually purchase tokens. So, when you see a price like $1 or $25.70 on a new coin’s chart, it’s crucial to understand that these numbers are not the prices at which retail investors are buying. They are the calculated low and high for the first day of trading, but not actual purchase prices.
4. Percentage Gains: How They're Calculated
Now, here’s where the confusion sets in. The percentage gains you often see (such as a coin being "up 2400%") are calculated based on the difference between the ICO/launchpad price and the current market price. This calculation is designed to show how much early investors (those who bought at the ICO price) have gained since launch.
For example, if the ICO price of a coin was $1, and the market price jumps to $25.70, the percentage gain of 2400% is calculated from that $1 ICO price to the current price, reflecting the profits made by seed or ICO investors.
5. Why You Shouldn't Be Impressed by Huge Percentages
Here’s the key takeaway: those massive percentage increases you see are not reflective of how you, as a retail investor, will make a profit. You don’t buy at the ICO price—you buy at the market price, which is typically close to the Opening Price when the coin starts trading.
For instance, if the market opens at $21.79 and then moves to $25.70, that’s the price new buyers are dealing with. The huge percentage gains reflect how much early investors made, not how much you can gain from buying at the opening price.
6. Understanding the Real Market Movements
The high and low prices listed are often random or speculative numbers based on market conditions, or they could be influenced by CoinMarketCap (CMC) data if the coin is already traded on other exchanges. At times, both the low and high prices are more about establishing price points for the first candle or the first few minutes of trading rather than true reflection of demand and market interest.
7. Key Takeaways: What You Need to Know
The percentage gain you see is typically based on the difference between the ICO price and the current market price, not actual market buying.
You buy at the opening price when trading starts, not at the launchpad price or low/high extremes shown.
The low and high prices are often there to show early price action and should not be taken as the actual prices at which new traders bought in.
Don’t be amazed by those huge percentage numbers; understand how they are calculated to gain a more accurate picture of the market.
In conclusion, it’s important to educate yourself on how these percentages and prices work so that you don’t get misled by sensational numbers. Always keep in mind that the true market price at launch is often far from the eye-popping gains shown from the ICO or seed investment phase.
Stay informed, and happy trading!
