It’s a Topsy Turvy Curvy Crypto World! – The J Curve And How To Use It To Profit
The J Curve is a pattern commonly found in the crypto price charts and can be used to increase your position or to take early profits from a potential crypto position. I'm going to break this down into the most basic form for the explanation in this post. But first look at this chart from coinmarketcap.com
The J curve is the sum of 2 prices, the actual value of the product and the hype value of a product. At the start of a J curve, the actual value is low and the hype value is low. The Hype starts to build up due to the fundamentals of the crypto, news and reviews. This hype causes the price to go up as seen in the first rise in price in the chart above around the 7th December.
Once the hype starts to die down, around the 8th of December in this chart. The bag holders will start to sell for small profits or to move into another potential gain. This causes the price to fall again and only people who are in it for the long HODL or people who really believe in the technology are left holding. Now the price is purely based on actual value as the hype has died down.
Above is the VeChain chart and again we see the J curve. An initial jump in price from hype indicated by the red section then a drop from profit taking and people not in it for the long-term indicated by yellow. A long green section marks the period of time where the actual value starts to rise from updates or realizations on the product features with a final jump in price in the blue section.
The final example is ICON shown below.
We can see that the J curve appears in many crypto, so how do we spot it early enough to take advantage of it? well, this is the tricky part. You first have to evaluate the fundamentals of a project and determine its value yourself. Then you check if the value is higher than your current valuation, if it is, then you need to look at the project and see if the price is being caused by hype.
You should know if the project is being hyped as you should be following all the social sites for that project if you're thinking of taking a position in it. If the hype is strong and the price is over 50% higher than your estimation then you should just wait, you may even be able to get in after the hype dies at a lower price than you first found it.
If you already have a position that is being hyped then you should take profits on the way up. If it is following the J curve then you can use these profits once the price falls back into the actual value range.
Sources:
https://www.investopedia.com/terms/j/j-curve-effect.asp
https://medium.com/@cburniske/the-crypto-j-curve-be5fdddafa26
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