Peace be upon you, my friends. A gift of important information regarding new currencies when they are listed, because their price rises greatly at the beginning, which leads to the greed of investors and consequently the loss of investors.
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When a new coin is listed on Binance, you may see amazing numbers like a 2400% increase, but the reality is not as it seems! Let's explain the details with an example so you don't fall into the trap. 🔍
How are the prices of the new currency determined at launch? 📊
When listing a new coin, Binance sets 3 main prices before trading starts:
1. Opening price 💰:
• It is the actual price at which trading begins based on supply and demand.
2. Lowest price 📉:
• Often derived from the ICO/IEO price.
• It does not mean that anyone was able to buy at this price after listing.
3. Highest price 📈:
• Shows the highest value reached by the price during the first moments of trading.
Common Misconception 🛑
❌ “I can buy the currency at the lowest price and sell it at the highest price immediately!”
✅ Fact: Everyone enters the trade at the opening price, which is the price set by the market with the first buy and sell order.
Illustrative example
Imagine a new coin like $VANA is listed:
• Lowest price: $1 (IPO or reference price).
• Highest price: $25.70 (at the moment of buying peak).
• Opening price: $21.79 (the price at which trading actually began).
The mistake people make:
Some people think that someone bought the coin for $1 and immediately sold it for $25.70 to make a huge gain of 2400%, but the truth is completely different!
Example scenario:
1. Before listing:
• The initial coin offering (ICO/IEO) price is set at $1 only.
2. Moment of opening the trade:
• Due to the high demand for the currency and the high demand compared to the limited supply, trading starts at $21.79 (opening price).
• Anyone trying to buy the currency will buy at this price and not at $1.
3. Climax moment:
• The price quickly rises to $25.70 due to high demand in the first minutes.
• However, most traders who bought at $21.79 cannot sell all of their positions at $25.70 because the market moves so quickly.
4. Price correction:
• After the buying peak, some traders start taking profits and selling the currency, so the price gradually decreases.
• Eventually, the price returns to levels well below the peak, surprising new traders who thought they were going to make huge gains.
Result:
• Almost no one buys at $1 and sells at $25.70 as some imagine.
• Most traders enter at the opening price and have difficulty making quick profits due to market volatility and rapid price corrections.
Conclusion 📝:
Don't be fooled by big numbers like 2400%!
• Understanding how the market works when new currencies are launched will help you avoid emotional decisions.
• Always focus on the opening price and be aware of the fact that volatility occurs in the first moments of listing.