2.2.0. The Secondary Wave
Following the initial price pump on listing, the massive selling by early investors and the consequent crash in price, the new crypto may remain at the Bottom of the wave for a while with its price neither going up nor go down significantly.
During this time, there may be bouts of small price increase or decrease. It is the Plateau Phase of the Primary Wave, which was the case with SOL whose price then fluctuated around 10 USD as mentioned in the last page.
If the Developers will continue to build the project by adding and upgrading the use cases and/or initiate Circulating Coin Reduction (CCR), as well as continue to advertise the project such as giving out some airdrops, it will eventually attract new investors and traders, who are often retailers at this stage.
As more retailers are attracted to the crypto, the crypto price will begin a gradual ascent, marking the commencement of the Secondary Wave as seen with the SOL price.
As price moves upwards, confidence in the crypto project will be gradually restored and many of the people who have given up will want to re-enter the market and buy back the crypto they’ve sold.
However, they will be buying the crypto at its new market price, which is often higher than when they had bought during Primary Wave.
Conversely, retailers who never sold their crypto during the Winter and Plateau Seasons of the Primary Wave are the ones that will be smiling in this Second Wave as they watch their investment increase in value.
They are the Strong Hands, also known as Diamond Hands as clearly seen with the story of Solana mentioned above.
2.2.1. How High Will a Secondary Wave Reach?
The important questions will be: “How high will the price rise to in this Secondary Wave? What will likely be the projected Peak of this Secondary Wave?”
How high the price of a crypto will rise to in its Secondary Wave depends on the type of the crypto project. If the project offers good use cases, implement good Circulating Coin Reduction (CCR) and continue on good market incentivization such as airdrops to attract more new investors and traders, the crypto price can rise far higher than the peak of the Primary Wave.
In fact, that was the story of Bitcoin when its Second Wave started in 2017 and peaked more than 300% of the First Wave (see Table 7 on Page 286).
2.2.2. A New Higher Bottom
As the retailers make such huge gains during the Ascent phase of the secondary wave, they would want to take their profits by selling some of their coins.
It begins with one retailer selling his coin, another one sells, then another, and before long a large number of retailers will be selling their coins.
The cascading effect is that there will be a progressive drop in the price of the coin. This is the Descent Phase of the Secondary Wave.
The price drop can be as much as 40 to 60%. But often the price will usually not fall below the bottom of the First Wave. What this means is that the lowest level of Secondary Wave is often higher than the bottom of the Primary Wave.
If the lowest level of the Secondary Wave falls below the bottom of the Primary Wave, it often corrects itself almost immediately.
Thus, once the Bottom of the Secondary Wave is reached, price will start to fluctuate sideways, marking the Plateau Season of the Secondary Wave.
In other words, the price in the Plateau Phase of a Secondary Wave is usually higher than the price in the Plateau Phase of the Primary Wave. This means that a new higher bottom is set. This is a form of Price Discovery.
2.2.3. Why Price Discovery in Secondary Wave
For most financial instruments, including cryptocurrencies, Price Discovery often occurs during the Plateau phase of a Secondary Wave.
Price discovery is simply the finding of a fair market price for an asset. This means the true worth of the asset is often determined during its Secondary Wave. Price discovery is largely driven by the forces of supply and demand and occurs as buyers and sellers of the crypto interact in a marketplace.
You may wonder: Why Price Discovery at this Secondary Wave?
The explanation for this is that, by the Secondary Wave, many retailers have developed some level of confidence in the crypto project and, hence, will not allow anything or anyone to dissuade them to sell off their entire crypto holding.
These retailers will want to hold onto their crypto for another wave, which they hope will come. This act will sustain the price of the crypto above the bottom price of the Primary Wave.
2.2.4. Rug-Pull Scams in Secondary Wave
Interestingly, note that if the lowest level (Plateau Phase) of Secondary Wave falls below the lowest price (Plateau Phase) of the Primary Wave and persists, there is something wrong with the use case of the coin or with the management of the Developers that cause many retailers to lose faith in the asset.
Such instances are seen when the Developers try to manipulate their way and commit fraud, thereby end up affecting the price of the crypto adversely.
Remember, you cannot deceive traders for a long time – any act of insincerity or fraud will deter traders from further patronising the crypto project and that will drive the price to a dangerously all-time low level, often below the lowest price of the Primary Wave.
In such an instance, if nothing is done to rebuild confidence, the crypto asset will enter into jail or die naturally in which case price will not bounce back and investors will lose their capital.
That has been the story of many cryptocurrencies. Because they are scam products and shitcoins with no obvious utilities, Developers of such cryptos often rug-pulled and run away with investors’ money. Be warned!
Indeed, as stated earlier in this chapter, most scam cryptos don’t survive beyond their Primary Wave. Where they do, the Secondary Wave will expose their antics.
Therefore, if you utilise EdaFace SOC Scorecard (see Page 55), you’ll most likely identify such scam coins prior to your investment and not become victims of rug-pulls.
2.2.5. The Dry Period of Secondary Wave
Just like in the Primary Wave, the Winter and Plateau seasons of the Secondary Wave are another dry period for investors.
However, the good news is that for most of these investors who bought the crypto asset during the Winter and Plateau seasons of the Primary Wave, they will be in profit since the bottom price of the Secondary Wave will be higher than the bottom price of the Primary Wave.
That was exactly the case with Bitcoin in its Secondary Wave. The Plateau price of the Secondary Wave of Bitcoin fluctuated between 4 030 to 15 479 USD when compared with the Plateau price of the Primary Wave, which fluctuated between 540 to 920 USD (see Table 7 on Page 286).
As it was in the Primary Wave, because the crypto has entered its Plateau phase of the Secondary Wave, which is often protracted and with no much positive price movements, many investors will be discouraged.
Those who don’t understand the psychology of the Crypto Market will give up as the second dry period rages on and nothing seems to be happening. Some may think the whole thing is a scam
With such discouragement, they will sell off their cryptos. These are the crypto visitors, often call Weak Hands.
What these crypto visitors do not understand about the Crypto Market is that this second dry season will one day be over and the sunshine will start again.
Nonetheless, when will this second dry season be over and when will the sun shine again? As it was with the Primary Wave, this depends on the Circulating Coin Reduction (CCR), the use cases (utilities) of the crypto, and advertisement efforts of Developers.