What do you actually look at when you buy a coin? How do you assess whether a coin's price is reasonable?

In the traditional stock market, a company's annual report performance and themes have a significant impact on its price, ROI price-earnings ratio.

The cryptocurrency market is still very early, with 99% of project coin prices having no relation to the products themselves; products do not require any value. Memes have created countless myths of getting rich quickly, and this cycle's eth - the so-called "world computer" has also severely impacted the so-called "value investors." Everyone is confused and helpless. Previously, the rotation of sectors and the information path dependence of eth/btc price fluctuations are no longer effective in this cycle.

Returning to the title, most people buy coins based on news media, judging positive and negative information conveyed through it. Of course, having one's own judgment already surpasses most people in the market, as most people rely on someone or some unfounded reason to buy coins. This is what is called "insider information," completely neglecting responsibility for their own money.

My gradually established understanding is that prices are influenced by supply and demand, by who is buying and who is selling, but we are still insignificant dust in the vast ocean. In this cycle, three types of coins have emerged: VC coins (with venture capital background and financing), meme coins (community autonomous CTO), application coins (exchange platform coins, new listing platform coins).

1⃣ Circulating Market Capitalization (MC) = Circulating Coins × Market Accepted Price

We first need to clarify two concepts. The circulating market cap refers to the current market value. There is also the FDV total market cap, which corresponds to the overall valuation. Total market cap (FDV) = total tokens × market accepted price)

The previous article discussed how projects in the coin industry are valued based on ecological leaders. Projects that issue coins early and manage to survive become the leaders, which establishes the market-accepted price. Why has the pricing in this cycle decreased? The main holders of pricing power are VC and exchanges. Previously, VCs had a lot of money while good projects were scarce, and project parties might not initially want to raise so much money, but VCs were eager to invest. This pushed valuations higher, such as ENA and scroll. Exchanges provide pricing suggestions for projects, but if it is a smaller exchange with fewer circulating chips and low liquidity, theoretically, pricing can be infinite. Thus, projects without IP and in spot trading can reach 5B.

In this round, VC activity has come to a standstill, with fewer investments being made, and there is a tendency to go out and start projects themselves, which has affected the current pricing of tokens.

The circulating chips are a vast topic and could fill an article on how I estimate chips. Now that information is becoming increasingly transparent, it's possible to check the project's unlocking information and selling pressure, and on-chain addresses have also been made public. In fact, many project teams can reveal whether they intend to do something or just engage in market-making by designing the tokenomics system.

2⃣Narrative determines how large the "tolerable bubble" can be.

In the traditional stock market, a company's annual report performance and themes significantly affect its price. However, the crypto space does not have performance; it is a series of narratives. Recently, PENGU, which has gone viral, has increased fourfold in one month, reaching a market capitalization of 3.5B, and all mainstream exchanges have completed the spot trading, indicating that there is indeed capital flowing in.

Why stories can keep being told:
- Early selling pressure has been digested, the community is strong, and the web2 IP continues to expand with physical products sold in the market, generating cash flow.
- The founder has strong resources, allowing top-tier projects to switch to pengu avatars, super advertising space.
- The animation on overseas social platforms is hot, making retail investors who don't understand dare to buy; family offices with plenty of money invest directly (news from special channels).
Remember that in the coin circle, it's not about trading for profits, but about trading in the direction that may be taken over in the future.

3⃣ Selling pressure vs. Market relay capacity

In the previous section, the analysis of pengu discussed the ability to deliver and receive goods. This indicates that you have a general understanding.

Shorting PENGU/LAYER is a "logical pair", but the "value of the project lies not only in the "pump", but in whether it can guide subsequent buyers to catch the chips. It is not a question of whether the coin price is high or low, but whether there are "people to take the last baton". As retail investors, we need to give up the preset notion of "how the market should move" and observe "how they plan to harvest". For example, the layer I mentioned earlier did not have retail investors lured into the market, and the project party had sufficient funds, so they could keep pumping, pushing it to 3.3B. (In the following half month, it dropped 4 times again.)

The price operation logic in the coin circle, to put it simply, is mostly detached from the fundamentals. It doesn't have a clear cash flow and profit model like stocks, nor can it be explained by supply and demand + geopolitics + cycles like macro commodities. Instead, it resembles a "narrative maze driven by capital."

In the end, make sure to think clearly about the reason for buying coins, how long you can hold them, and when to stop loss or take profit. Don't be impulsive!
The price of coins will not rise or fall indefinitely, and will be benchmarked against leading exchanges. The more exchanges listed, the better the liquidity. What type of token it belongs to: defi, exchange coin, public chain coin... It is very difficult for the market cap of the second-tier leader to exceed that of the first-tier leader.