I have joined many presales over the years and have come to one conclusion: never join a presale during a bear market.
Presales in the bear market is the absolute worst. Because they always and inevitably lead to a loss of capital for the investor. At the end of the presale, the price always collapses. The opposite has never happened.
That is why it is much better to wait for the presale to end and invest when the price falls on the spot market. The dynamic of a presale is usually just that: first, there is hype, then there is collapse.
In addition, there is another reason why you should wait until the end of the presale before buying: to avoid scams.
Projects that are too young are, in most cases, scams, i.e., rug pulls aimed at stealing money from investors. A modern scam (slow rug pull) has an average life of 15 days. So it is better to wait 15 days before investing.
I wait 15-20 days before investing in a project. I need 20 days to verify that the owners are not scammers and to wait for the price to drop after the hype of the presale.
Avoiding scammers (Slow rug pull)
Traditional scammers (numerous in 2021) used to put bugs in the contract to empty all the money from the liquidity pool. But today, things are different; crypto investors have gotten smarter.
Today there is the slow rug pull. Let’s see what it consists of and why it works well when combined with the presale.
Presale is used to pump up the price, which is why many scam groups use it to do a slow rug pull. Platforms like Pinksale allow you to trend the token and thus attract new investors by generating hype.
Once the presale is over, the scam begins. The slow rug pull kicks in. Slow rug pull is slowly selling the project creator’s tokens by bringing the market cap to zero.
It differs from traditional rug pull, in which scammers empty the liquidity pool and run away with the loot. Today, this scam is more complicated because numerous systems detect contract honeypots.
On the contrary, the slow rug pull relies on a legit contract with no bugs or honeypots. But the contract creators, before offering the token for sale, generate wallets of their own to which they send a portion of the tokens. They have to ensure that the digits are not round numbers. Otherwise, they are easily detected by those who can read the movements on the etherscan and bscscan.
After creating these wallets, which are perfectly hidden among investors’ wallets, they launch the presale. During the presale, the project reaches hype. Often these platforms have a system to push projects and get new investors.
The price goes up.
At the end of the presale, the tokens are distributed to all investors.
After that, the selling by the team begins, and they start liquidating their positions slowly without making investors suspicious. The slow rug pull is in place.
It will end when the liquidity pool has been emptied in full.
Avoid short-term traders
But you don’t just have to defend yourself against scammers. I avoid presale to guard against short-term traders, famous for being called “paper hands.” These hold the token for only a few days and then sell it back.
Paper hands are exceptionally emotional and mainly lose money. In fact, after buying the token during the presale on very unfavorable terms (nowadays, all presales are done under the unfair fair launch system), they get rid of it as soon as they see that it gets sold on the spot market.
This happens especially when they are in a bear market. After the presale, in a bearish environment, the price falls, and the paper hands get rid of the token, often getting a loss.
I prefer to wait until the end of the presale to buy the token.
Another reason why I do not recommend participating in presales is when the evil fair launch system is adopted.
Fairlaunch: the unfair presale
What is a fair launch?
In simple terms, a “fair launch” of a crypto project refers to a launch where tokens are distributed fairly to the market participants. In its purest form, there is no founder allocation or early access. Through fair launches, everyone is equal in the project’s ecosystem from day one.
The fair launch is called fair because it wants to communicate to us that no matter if you are the first to arrive or the last, everyone will be treated equally. This is heartwarming but deeply unfair.
Why does a fair launch only pay off if you’re a latecomer?
Finding crypto gems is a complex operation requiring much study and effort. Finding a gem can take days or even weeks. It is by no means an easy task, as scams abound, and creating a crypto token is a simple operation that anyone can do. The inflation of crypto projects makes finding gems especially difficult.
You must analyze numerous projects before finding a gem. Out of 500 projects viewed, only one can be considered a gem. The majority are discarded. So after much effort, you want an advantage over others when you encounter one.
But a fair launch annihilates all your efforts by making them in vain.
The latecomer, who did no DYOR work but found the project spammed by the hype generated by the presale on Twitter or the launch platform (e.g., Pinksale), receives the same treatment as the one who had found the project weeks before and had eagerly waited for the presale.
How does the presale fair launch work?
In the presale, the team will offer a specific number of tokens for sale (e.g., 10,000,000 tokens). These tokens will be divided among all presale participants equally (e.g., 1,000 tokens for every dollar)
As investors grow, the ratio of dollars/tokens changes. The numerator goes up, and the denominator goes down.
Investor A spends $100 in exchange for 100,000 tokens. This money is not given to him immediately. He is just told that if no other investor joins, then he will have that amount of tokens.
But of course, during the presale, more investors arrive. By the end of the presale, many investors have come, and that precise number of tokens (10,000,000) has to be divided by more people, so the dollar/tokens ratio changes.
At the end of the presale, each investor, instead of receiving 1,000 tokens for one dollar, will receive 200 tokens for one dollar.
Investor A will only be able to withdraw 20,000 tokens, no longer 100,000.
That is why I think it is stupid to invest at the beginning of the presale fair launch. It is better to invest when the presale is about to end. Only in this way can you know whether you will make a good deal or a bad one.
Why does it make sense to wait until the end of the presale and buy the token on the spot market?
When the token is on the spot market, the number of tokens is given according to the market cap value.
So if the market cap is $100,000:
$100 is equivalent to 1/1000 of the entire value. So you receive 1/1000 tokens. With $1, you receive 1,000 tokens.
On the other hand, when the market cap is $1,000,000, your $100 represents 1/10,000 of the whole amount. In that case, with $1, you receive only 100 tokens.
That is why if I see a fair launch, I avoid joining. I wait for the end of the presale and the post-presale collapse.
Once the token is freely tradable in the market, I wait for the market cap ratio to become favorable.
Only then do I buy the project.
You may have guessed that I am not a big fan of the presale. After doing a few of them, I gave up. In any case, one thing is sure: buy tokens on the spot market. It is much cheaper. I have developed a personal investment strategy that I intend to explain in these articles.
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