This article explains the power of crypto asset communities. Technical and fundamental analysis are logical ways to research companies and digital assets, but communities are far more challenging to judge.
Research and Analysis
At Coinbusters, we strive to provide quality research focusing mostly on fundamental analysis of digital assets including Bitcoin, Ethereum, and others. Sometimes we cover some basics of technical analysis, but we are by no means professional short-term traders. Our favorite strategies involve a blend of long-term dollar-cost-averaging, and what is known as swing trading. One common strategy we employ is to dollar-cost-average the major bluechips of the market such as Bitcoin or Bitcoin related stocks.
With a portion of our portfolio, we make short to medium term moves analyzing market sentiment/psychology, value, and blockchain metrics. One rather challenging area to analyze is the power of communities in crypto. While there are certainly communities in the stock market, none can compare to the hype and euphoria of a community behind a particular token/network or NFT project. A great example of this is the OP token for Optimism network. If you are a prime reader, we rated the fundamental analysis of the token itself a “we need more information on the tokenomics/future plans”.
Since then, we have followed the OP token closely and it made an almost 400% move in short-order. The fact is people like using optimism, and although the token economy is not yet sound, this did not stop the community from continuing to stack tokens. OP will likely continue to garner strength as the market recovers and could possibly emerge as a leading layer-2 solution for Ethereum.
Popular Crypto Communities
Perhaps the best example of a crypto community in crypto is that of the Bored Ape Yacht Club. While I am not NFT specialist, who would have thought a simple several hundred-dollar investment into an ape would yield possibly a 1,000x or more return. Ape holders got access to an alpha leak discord channel, future airdrops of other NFTs including digital land, airdropped tokens and more. Many prominent celebrities and crypto personalities feature apes as profile pictures signaling their membership into this elite community. Bored Ape NFT prices have stood strong during this bear market, emerging as a bluechip NFT project.
While many may not fully understand it, powerful communities can easily rally the token price to astronomical amounts. Another popular example is the community surrounding Cardano and the ADA token. Cardano is one of the few tokens to peak at nearly a 100-billion-dollar market capitalization during the last bull run. But what does Cardano provide today? Cardano has lagged behind more functioning networks by a great degree. Yet the community has carried the token price to such high valuations. Smart contracts are finally functioning but there is still a lot more work to be done. Despite these major shortfalls, Cardano has some of the most hyped, dedicated, and unrelenting investors of any project.
Polkadot is another example similar to Cardano but to a lesser degree. The Polkadot community was strong since the established leader was a prior Ethereum developer. The community garnered strong institutional support and finally launched their parachains last year. For a review of what parachains are, check out our article [here]. After all the hype cooled off, Polkadot did not provide as much as was promised. Many applications were lackluster as were the token prices. This could be poor timing since the bear market started just after many new projects launched officially on Polkadot. Polkadot remains one of the strongest crypto communities.
Many communities do not simply back a project or token, they back an influencer. Some popular examples are Bitboy Crypto and the Coinbureau. Not all influencers provide the same quality content. Coinbureau is one of our favorite educational/entertainment crypto advocates in the entire space. I have written many articles with the assistance of Guy’s research and videos. When he mentions a project during bear or bull markets sometimes the token price will pump multiples just because his following is so large.
You get the point, communities can heavily influence the price of a digital asset. But how do you know which communities are providing quality, and which are shills and shams? At Coinbusters we have been working on creating an algorithm that provides some direction on community sentiment. I have always utilized my former degree in psychology to predict market sentiment when purchasing assets. We are striving to take this a step further by combining sentiment analysis backed by numbers and data. Thank you for reading, remember none of this is financial advice.