Narrative-Driven Coin Pump: A Crypto Investment Strategy for Mid-2024

Tags: crypto, invest, trend

Abstract: This article will analyze the phenomenon of narrative-driven pumps in the crypto market, explaining why it is effective and the inherent risks. We will also discuss the importance of aligning projects with prevailing narratives to attract investor attention.

Narrative – Driving Force of the Crypto Market

In the volatile cryptocurrency market, narrative plays a crucial role. Narrative can be simply understood as a story, a trend widely disseminated within the community that captures investor attention.

Example: The narrative surrounding artificial intelligence (AI) has ignited a frenzy for altcoins like FET and RENDER. Both coins surged in price based solely on the expectation of increased revenue for NVIDIA, a leading company in the AI sector. Similarly, the GameFi narrative has fueled the growth of altcoins like IMX, CHR, and PRIME, particularly after the announcement of Sony’s Soneium platform.

It can be seen that the price increase of these altcoins does not necessarily depend on the project’s own operations but primarily relies on the prevailing narrative. Investors buy based on news and expectations, not on the actual value of the project.

The effectiveness of narrative pump stems from herd mentality and the FOMO (Fear of Missing Out) effect. When a narrative is widely spread, everyone wants to join the “game” to avoid being left behind. Narratives/trends lead to a surge in prices of altcoins related to the narrative, despite the actual operation of the project.

Opportunities & Risks When Following Narratives

Following narratives can bring significant benefits to crypto projects by attracting attention and attracting investor capital. However, it’s a double-edged sword.

If your project cannot align with any narrative, you will have to create attention and attract investment independently. This is very challenging and requires a lot of time and effort. You need an effective marketing strategy, build a strong community, and demonstrate the true value of your project.

For retail investors, it is crucial to exercise extreme caution when investing in projects that “pump based on narratives.” These small pumps are often opportunities for big players to exit their positions, including those who bought at high prices (top chase) and those who quickly take profits.

Note: “Strong pump, strong dump” – meaning that when the price rises sharply, a sharp decline is also likely to occur.

According to Click Digital, investing based on narratives is fraught with risk because it is easily manipulated and difficult to control. Never invest in a project just because it aligns with a prevailing narrative. Combine it with fundamental analysis, platform, and fundamentals.

Advice for Investors

This season is a season for coin pumps based on trends/narratives, and if you make a profit, you should take it! Don’t get caught up in narratives promising high returns. Remember, narrative pumps are based on news, not on technology. Invest based on thorough research of the project, fundamental analysis, and long-term development potential.

In addition, closely monitor market movements, stay updated on emerging narratives and potential risks.

Ask yourself: “Is this narrative sustainable? Does the project have long-term development potential? Is anyone exploiting this narrative to exit their positions?”

Conclusion

Narrative plays a crucial role in the cryptocurrency market, but always remain alert and cautious about narrative-driven pumps. Don’t let yourself be swept up in the market’s cycle, invest intelligently and strategically.