2.1.0. Primary Wave
The Primary Wave starts from the creation of a crypto. When a cryptocurrency is created, the price is often ridiculously cheap. There are four levels at which you can acquire such a new cryptos at ridiculously cheap prices:
(a). Seed Phase
At the conceptualization period, when the crypto project is still an idea, the Visioner of the crypto project may assemble a team of Developers, and then approach some people to assist in funding the crypto project.
These first set of investors may be relatives, friends or colleagues of the Developers or angel investors. For taking the risk to invest in a project that may or may not succeed, these seed phase investors are rewarded handsomely with a good amount of the coins.
With the resources gathered at the Seed Phase, the Developers will start building the digital infrastructure, pay for the IT work, set up the preliminary website, mint the crypto, pay for audit of the contract, and do other basic things.
(b). Private Sale
After the Seed Phase, many crypto projects will want to raise further funds by selling the coins to larger number of people outside their immediate relationships. This is the Private Sale.
At the Private Sale phase, the crypto project is ready to attract partnership. Private individuals and companies are wooed to become part of the crypto project by offering them some of the cryptos at a very ridiculously cheap price.
Some form of KYC (Know Your Customer) documentation may be required to participate in the Private Sales. A notable incentive that may be given at the Private Sale is an Airdrop. It involves giving out free coins to incentivize people to get involved with the project.
Private Sale is a marketing plan to advertise the crypto project and raise more money for further development of the project. Often there is a target amount to be raised.
A softcap is the minimum amount of money required for the crypto project to start. The amount generated during the Seed Phase and Private Sale should be enough to meet the softcap target. If the softcap is not attained, the project is often reviewed or discarded with the investors’ money being returned to the owners.
(c). Public Presale
Once the Private Sale is completed, the crypto project moves to the Public Presale, which is regarded as the Initial Coin Offer (ICO). See the modules of Class 3 of the Secondary SOC.
One of the goals of the Public Presale is to test run how the crypto will perform in the general Crypto Market. It involves offering a sample of the crypto for sale at a public platform usually still at a very cheap price.
Such public platforms for launching the Public Presale can be a Launchpad such as Binance Launchpad and EdaFace Launchpad (launchpad.edaface.com), a popular exchange, or a platform built by the crypto project.
Another goal of a Public Presale is to generate the hardcap, which refers to the maximum amount of funds that will be needed to run the crypto project.
Usually, once the hardcap is reached, further sale is stopped and the ICO is terminated, and the crypto project is then set for the next phase, which is listing.
What if the hardcap is not reached during the Public Presale? The ICO may be extended or the Developers may decide to move on to the next phase – the listing.
(d). Listing
This is when the crypto project is officially launched in the Crypto Market.
In both centralized and decentralized exchanges, cryptos are traded in pairs. For example, Ethereum can be traded with Bitcoin, which is referred to as ETH/BTC pair. Therefore, to list a crypto, it means it has to be paired with another crypto so that traders can begin to trade with it.
For instance, let’s say a new crypto, ABC, with a Total Supply of one billion tokens, is to be listed on Coinbase exchange. The Development Team of the crypto has decided to pair the ABC with BNB coin at listing in Coinbase.
The ABC-BNB pair is called the Trading Pair, Base Pair, or simply Market. The ABC is called the Primary Base Crypto while the BNB is the Secondary Base Crypto.
After some of the tokens have been given out at the Seed Phase, Private Sale, Public Presale, Team Members allocation, marketing purposes, etc., let’s say 10 million tokens have been kept aside by the Developing Team for listing on Coinbase exchange.
The 10 million tokens of ABC that has been set aside for listing in Coinbase will be the Circulating Supply of the token.
Let’s say the Developing Team of ABC decide to buy 20 000 dollar-worth of BNB for pairing with ABC to form a trading pair. It means 10 000 000 ABC will be paired with 20 000 dollars of BNB. In this case, the listing price of ABC will be calculated as follows:
10 000 000 ABC = 20 000 USD of BNB.
Thus, one ABC token = 20 000 ÷ 10 000 000 = 0.002 USD
Therefore, the listing price of ABC/BNB pair in Coinbase will be 0.002 USD.
This is a cheap price, and early investors will see it and rush in to buy the listed ABC.
This means on listing at 0.002 USD, the Market Capitalizations of this new ABC token will be as follows:
(a). Diluted Market Capitalization of ABC:
Total Supply x Market Price = 1 000 000 000 x 0.002 USD
= 2 000 000 000 USD
(b). Undiluted Market Capitalization of ABC:
Circulating Supply x Market Price = 10 000 000 x 0.002 USD
= 20 000 USD
For more on Diluted and Undiluted Market Capitalizations, see earlier lectures. Investors and Traders will look at these figures as well as other factors (see the Lectures of Course 2 on Page 53) to make informed decision on whether ABC token is viable enough for them to get involved.
2.1.1. Two Factors that Control Listing Price
Note the two factors that control the listing price of a cryptocurrency:
(i). The Amount of Primary Base Crypto Available for Listing
In the above example, if a lesser number of ABC (the Primary Base Crypto) such as 10 000 coins is supplied to pair with 20 000 USD-worth of BNB (the Secondary Base Crypto), the listing price will be higher; that is, 20 000 ÷ 10 000 = 2 USD.
However, what this means is that only few coins (10 000) will be available for trading. This is a small liquidity that may discourage investors and traders from buying the ABC token.
Thus, the challenge that the Development Team of a Crypto Project faces is how to raise enough money during the three Presale Periods – Seed Phase, Private, and Public Presale – to be able to list at a reasonable price with good liquidity.
(ii). The Amount of Secondary Base Crypto Available for Listing
Note that the Development Team of a Crypto Project will want to pair their crypto with a popular crypto that has good liquidity.
For example, it makes no business sense to pair the new ABC token with an unknown coin. If this happens, many people will not know about the ABC and most crypto exchanges may not agree to such pairing as it will not attract many traders and investors to their platforms, and such low patronage can result in business losses.
Therefore, the Development Team will want to pair ABC token with popular secondary base cryptos like BNB, Ethereum, etc. That means the Development Team will need to buy these secondary base cryptos that will be used to form the trading pair for their crypto.
If a large amount of a secondary base crypto is acquired for pairing with a primary base crypto, this will yield a bigger listing price and a large liquidity that will attract investors and traders to the project.
The converse will be the case if a small amount of a secondary base crypto is used to form the trading pair with a primary base crypto. A small liquidity will not attract investors and traders to the project.
For instance, in the above example, if one million USD of BNB (a secondary base crypto) is bought to be paired with ten million ABC token, the listing price of ABC will be higher than the 0.002 USD as follows: 1 000 000 ÷ 10 000 000 = 0.1 USD.
2.1.2. The Important Question
The important question will, therefore, be:
“Why will the Development Team not buy a lot of the Secondary Base Crypto to pair with their Primary Base Crypto or reduce the amount of the Primary Base Crypto being listed so that the listing price can be high?
For example, “Why not buy a lot of BNB to list the ABC or reduce the amount of ABC being listed so that the listing price can be high and attract investors and traders?"
There are three main reasons:
(i). Marketability
A high listing price will mean a larger market capitalisation, which at first value, sounds quite attractive. However, a high listing price means that the crypto will be too expensive and unaffordable and, hence, will discourage people with small incomes – the retailers – who constitute more than 90% of investors and traders in the Crypto Market as at the writing of this manuscript.
Indeed, the popular idea in the Crypto Market is that Development Team (also called Developers, for short) prefer the listing price of their crypto to be cheap so as to attract many people to the project.
The involvement of many people will mean an increase in the trading volume, which will subsequently drive up the price. After all, crypto trading, like every other market, is a game of numbers!
Nevertheless, Developers wouldn’t want to keep the price too cheap to appear like a child’s play to seriously minded investors.
In other words, Developers will have to find a middle ground not to list at too high price nor at too low price.
(ii). Not Enough Capital
The second reason why a crypto may be listed with a small market price may be that the Developers simply did not raise enough capital to list the crypto.
Remember the secondary base crypto that will be used to pair with the primary base crypto will need to be bought; buying a large quantity means spending large amount of money, and most new crypto projects may not have that large sums of money.
As such, the Developers of the new project will have no choice but to list their new token at a low price, and then find a way to gradually build up the price. This means the Developers will have to continuously source for funds for marketing and to continuously upgrade the use cases of the crypto to attract more and more people to the project.
(iii). Anti-Whale Activity
If the price of a crypto is ridiculously cheap at Presales, it means early investors will easily accumulate huge amount of the crypto, which will make them whales.
A crypto that was sold very cheaply at the Presale and is then listed with a high price means that the early investors will make excessive amount of profits. If you were the person with such huge profits, what will you do?
Of course, the natural tendency is to sell and grasp the huge profits once the new project is listed. Such an action will be good for you as an investor, but not good for the crypto project. Imagine if massive selling occurs at listing, it means dumping the young crypto project, which may not survive such selfish whale selling!
Developers know this phenomenon very well, and no Developer will allow his crypto project to be destroyed by the dumping activity of the whales. Hence, a Developer will want to list his token at a price that will act as an anti-whale activity to prevent such massive dumping.
Again, this means the Developer will have to find a middle ground not to list at too high price to attract dumping nor at too low price to discourage many seriously minded investors and traders.
This is the Dynamics of Crypto Listing that you should be aware of if you are serious about making profit from the Crypto Market!
2.1.3. Price Dynamics on Listing
The point here is that on listing, a new cryptocurrency usually has a low market price, hence, low market capitalization, and therefore has a lot of room for growth.
Most times, only few people get to know of the new cryptocurrency in the market, especially when it is still in presale. Among the few people that come to know of the new crypto, some will still not buy into such a young project. A lot of reasons are responsible for this:
(1). Some people think the new project is not worth the risk
(2). Some people do not see any future growth in the crypto
(3). Some people think the crypto project is a rug-pull project that will scam people’s money.
However, the very few investors who take the courage to buy the crypto at such ridiculously cheap presale price are taking the risk. They may lose their money or gain fortunes.
Remember the general advice: DO NOT invest what you cannot afford to lose!
Most often, once listed in the Crypto Market, the price of the crypto skyrockets, sometimes as high as 10%, 100%, 1000%, and even more, as many people rush to buy the crypto at the listing price. As such, these early crypto investors would have multiplied their investment multiple times, making it a risk worth taking!
Following such surge in price, about 50% of the holders will sell off their crypto and recoup their profits. Massive selling will mean sudden drop in the price of the crypto, and which will trigger fear, causing more selling and further price reduction.
2.1.4. The Dry Period for Investors
The Primary Wave for Bitcoin started with the birth of Bitcoin in 2009 (Ascent period). The Bitcoin price moved gradually to a Peak in 2013 (after the 2012 Bitcoin Halving), and then came down sharply in mid-2013 (Descent period).
Bitcoin owners made profits as they sold off their coins in 2012 and 2013 during the Ascent and Peak periods, after which the price of Bitcoin plummeted downwards, signalling the Descent period of the Bitcoin Primary Wave.
The decline in price during the Descent period in the life of a crypto often generates fear in the amateur traders and investors, causing them to sell off their positions prematurely.
However, many of these retailers do not realise that it is the descent phase and another price cycle will surface as long as the project is one with worthwhile utilities.
The fact is that it is not a good emotional experience to see your funds depreciate by as much as 30 to 80%. Many of the hodlers often give up at this descent stage, branding the crypto as a scam, especially in the face of touts and jeers from mockers.
The steep price decline of the Primary Wave continues until the price of the crypto reaches an equilibrium where it neither goes up nor comes down. That is the bottom. It is the Plateau Season.
The reason why the price enters an equilibrium is because few traders and investors, who still believe in the crypto project, have not joined to sell off their coins. They keep their coins in their wallets, which act as a buffer for the crypto price, with the hope that the price will rise again.
For Bitcoin and many other cryptocurrencies, the Plateau Season is often protracted, sometimes for months and in some cases 2 to 3.5 years. It is the dry period for most investors and even traders!
2.1.5. Why People Give Up in Plateau Season
The Winter and Plateau seasons are when many people give up and sell off their cryptocurrencies out of frustration. Why they do that is often because of either of these three reasons:
(a). Ignorance of the Crypto Market – they don’t know that the Primary Wave has finished and there’ll be another wave.
(b). Pressure to use the invested money for other life exigencies.
(c). Temptation to pull out the capital for re-investment in another project, which they think will be more lucrative.
Interestingly, despite these reasons, the dry periods of Winter and Plateau seasons present an opportunity for you to invest in the crypto that has good utilities, particularly if you have missed the presale price.
Indeed, many people who have made good fortunes in the Crypto Market were those who took advantage of a Crypto Winter and a Plateau Season to invest massively.
For example, in 2020, Solana (SOL) price started an ascent phase, climbing gradually, to reach an all-time high of 259.52 USD on 6th November 2021. SOL has good utilities being the native crypto of Solana ecosystem.
Nevertheless, from Dec 2021, the price of SOL started to fall as it entered a descent phase, the Winter Season, which continued until it hit the bottom in November 2022 following FTX bankruptcy. At the bottom, which was the Plateau Season, SOL price fluctuated around 10 USD.
The protracted Winter and Plateau seasons frustrated many people to sell off their SOL. In fact, there was large cry across the Crypto Market as many people bemoaned their seeming losses.
Nevertheless, a few smart investors and traders saw things differently. Rather than selling, they kept buying and amassing SOL during these dry periods.
Then, new technology as well as increased advertisement efforts were introduced into the ecosystem by the Solana Development Team. Consequently, from September 2023, the price of SOL turned around and started an ascent period as another cycle kicked in. By February 2024, SOL has reached 110 USD and still going upwards.
Those smart investors who invested in SOL when its price plunged to about 10 USD have reaped 1000% gain thus far! That is the power of understanding the Psychology of the Crypto Market and ceasing upon such opportunity to invest accordingly!
In Summary
The entire period of Seed Phase, Private Sale, Public Presale, and Listing constitute the Primary Wave of a crypto movement.
It is the cycle during which many smart investors make good fortunes from a crypto investment and many people lose their capital because of the sudden plunging downwards of the price on listing from massive whale selling.
