When a new token launches on Binance or any other major exchange, there may be a temptation to jump in immediately. However, making informed decisions is key to avoiding unnecessary risks and losses. Follow this step-by-step strategy to evaluate the coin before you decide to trade or invest:
1. Research the pre-launch sell-off:
Start by checking whether the token conducted an initial coin offering (ICO), pre-sale, or private sale. If so, determine the pre-sale price and compare it with the expected listing price. Tokens that have already gained huge popularity before launch often lead early investors to quickly sell their assets to lock in profits.
2. Understand the supply dynamics:
Learn about the total supply of the token and its circulating supply at the time of launch. The total supply is the maximum number of tokens that will ever exist, while the circulating supply reflects the amount available for trading at the moment. A high circulating supply compared to demand can exert downward pressure on the price.
3. Determine the project's niche:
Identify the project's focus. Is it part of trendy narratives such as Artificial Intelligence (AI), gaming, layer 1 or layer 2 solutions, the metaverse, DeFi, or another niche? Projects tied to current hype cycles may experience initial surges but can lose momentum as attention shifts.
4. Analyze the price gap at launch:
Once the token is available, compare the launch price with the ICO or pre-sale price. If the price has sharply risen significantly above the pre-sale price, this indicates a high likelihood that early investors or airdrop participants will start selling their tokens for profit.
5. Evaluate market capitalization:
Look at the market capitalization of the coin at the time of launch. If it is exceptionally high—say, above $300 million to $400 million—it signals limited growth potential in the short term. Coins that launch with inflated valuations often attract sellers rather than buyers, leading to quick corrections.
6. Avoid overvalued entries:
Ensure that the token price remains reasonable compared to its ICO valuation. Ideally, the market capitalization should remain below $400 million. If the price rises too quickly and too high, it becomes risky, as strong sell pressure can lead to sharp declines.
7. Check for existing trading activity:
Find out whether the token is newly launched or already trading on other exchanges. Coins that are already trading may have established price patterns, reducing the uncertainty of initial volatility.
8. Investigate airdrops or incentives:
Determine whether the project distributed free tokens through airdrops or promotional events. Airdrop recipients often sell their tokens as soon as trading begins, causing a surge in sell orders and lowering prices.
Final thought: is it worth buying immediately?
My advice: avoid chasing the coin right after launch. Here's why:
Recently launched tokens have high volatility and are often overvalued due to hype and fear of missing out (FOMO).
Monitor price movement for at least a few hours or even days. Allow the market to stabilize and form a base price.
Buying at an inflated price can lead to significant losses as early investors offload their assets.
Instead, be patient, observe market behavior, and wait for a clear trend or reliable entry point. Making an informed decision will give you a much better chance of profit in the long run.
In trading, patience is more rewarding than impulsive decisions. Happy trading.