The Hype Risk of “Hot Coins” in a Bear Market

Since this period of time, DeFi has been a hot spot in the circle. The two most popular projects are COMP and BAL. Among them, COMP is the governance token of Compound, and BAL is the governance token of Balancer.

These two coins ushered in an unexpected surge at the beginning of their listing, so after a period of precipitation, what is the current situation of these two coins? Let's take a look at their recent trends:

Let’s take a look at the trend of COMP first:

The picture above shows the price trend of COMP. It rose rapidly from $96 at the beginning of its listing on June 17 to $341 on June 22 in less than a week, and then to $176 on July 13. The price of the currency has fallen by nearly 50% from the highest point, and the price has doubled since the beginning of the listing.

Let's look at the trend of BAL again:

The picture above shows the currency price trend of BAL. It reached its highest price of $19.72 at the beginning of its listing on June 25, and then went down all the way, and dropped to $9.86 on July 13. The currency price has dropped 50% from the highest point.

The trends of these two coins have one thing in common, that is, both have fallen by 50% from the highest point, and the time of the fall is very fast. Both COMP and BAL only took about 3 weeks to fall in a straight line. This is enough to show that at the beginning of the listing of these two coins, there was considerable speculation in the price of the coins, and their hot spots did not have a strong persistence.

Whether the prices of these two coins will continue to decline in the future is hard to say, but it may be very difficult to regain the peak again in the short term.

Because there are still a lot of projects in the DeFi field waiting to be listed on the exchange, and each project has a new way of playing, they will continue to attract the attention of investors, and funds will continue to chase hot spots. in this caseIf a project does not have a high enough threshold to attract hot spots and funds, the trend of currency prices will fall rapidly after a burst of enthusiasm.

The same is true for another popular project NXM these days. In addition to paying attention to its fundamentals, we should also pay attention to its currency price increase. Its currency price has increased by 4 times in the past 2 days. With such a high increase in a short period of time, we must carefully judge whether it has long-term investment value from a price perspective.

In my previous analysis article, I once compared this type of DeFi token with the tokens that were popular in the IEO wave in 2019. They all have one thing in common: they are all projects with good fundamentals, but their future growth and expectations have been overdrawn at the beginning of their listing, which makes such coins unattainable in the short term from a price point of view. Long-term investment value.

Let's look at the development potential again,As far as the DeFi track is concerned, it is still in the early stages of development. New projects are emerging one after another, and the tricks are constantly being refurbished. Which of these tricks and these innovations will really have application value, which one can create great liquidity, or even which one will Becoming a unicorn may not be visible in a short period of time, so it is very risky to make a big bet on any project, especially when the currency price is high.

That's why I didn't recommend you to invest in these coins directly in the article.

Although we should be cautious about investing in tokens with obvious traces of hype, we must pay close attention to this field. Why? Because this field is very likely to produce applications that we cannot imagine, and disruptive scenarios that we cannot predict. In this process, we may encounter investment opportunities not inferior to Bitcoin and Ethereum.

In the investment world, many people have heard such an old story: in the western United States at the end of the 19th century and the beginning of the 20th century, there was a big gold rush. A large number of warriors rushed west to pan for gold. But in the whole process, there are only a few people who really made a lot of money from gold panning. On the contrary, companies that sell gold panning equipment and utensils have made a lot of money by taking advantage of this trend.

Here are two typical domains: one that sells digging shovels, and one that sells gold panning overalls. And the person who sold the gold rush overalls not only made a lot of money, but also became a world-renowned denim giant: Levis.

So in this DeFi tide, is there any opportunity to make money by selling shovels and jeans? I think there are, one is ETH, which is inseparable from DeFi, and the other we have to see which applications are inseparable from DeFi.

For ordinary investors, the easiest and most labor-saving way to grasp the DeFi tide is still to invest in ETH.