What decides the value of a crypto token? The token value reflects a project’s growth potential and its inherent worth. However, its price could be a factor in many things.
Usually, crypto prices, as they work for other commodities and currencies, are functions of supply and demand. The higher the demand, the higher the price – and vice versa.
Apart from a project’s growth potential and supply and demand dynamics, something else could prove crucial – for instance, the exchange liquidity. In other words, the exchanges that have listed the token have a decisive role to play. Wondering how? Let us delve deeper.
Big Exchanges with High Liquidity is Not All
Exchanges like Coinbase, Upbit, or Japanese markets are fiat-heavy and create a value premium due to more buy pressure. Coinbase, for instance, has trading pairs between all the major crypto and fiat currencies.
There have been days – during the past month, for instance, when the spot and derivatives trading volume on Coinbase has crossed US$15 billion. Most of this volume comes from trading pairs that involve the US dollar and major cryptocurrencies like BTC, ETH, XRP, etc.
The same is true for Upbit. This year, in early February, the exchange witnessed a spot and derivative trading volume of more than US$10 billion.
However, if we were to judge exchanges only by their liquidity, Binance would have been the best. Currently, it is a centralized exchange that ranks #1 on the BitDegree exchange tracker, with a trading volume of over US$14.5 billion in the last 24 hours and US$9.59 trillion (at the time of drafting the article).
However, while Binance is good for liquidity, it is full of paper-hand traders who buy and sell quickly. These are individuals who hastily sell their crypto assets under the influence of random factors like fear or panic. These are the sort of traders who have led crypto markets to earn the reputation of being speculative and unpredictable. Many factors lead to paper-hand trading. These factors include lack of understanding, fear of loss, herd mentality, lack of patience, etc.
Evidently, exchange liquidity is not a factor that could be termed a very wholesome signifier of the crypto market’s health.
Identifying High Potential Yet Undervalued Assets is the Key
Experts believe the ideal play is to find tokens listed on top-tier exchanges that are undervalued. And then help them reposition for a re-rating. However, identifying tokens of value is not easy, especially for retail investors who lack the organizational resources to read and track assets effectively.
Well-established investors, like Binance Labs, Samsung Next, Arthur Hayes, etc., have the mechanism in place to identify high-potential yet undervalued tokens.
Binance, for instance, published a list of undervalued altcoins that had the potential to explode. All these tokens were available at the price of US$0.01 or less. It also listed ways to identify undervalued tokens.
These factors included strong community & hype surrounding the token, the token having a purpose beyond speculation, exhibiting increasing trading volume despite having a small market cap, a robust developmental roadmap, etc. But, it is not always possible to track these many factors without a team and strong organizational backing.
Fortunately, there are platforms that can help. Coin Terminal, for instance, enables ordinary investors to invest in tokens that are not widely discussed, but have the potential to deliver amazing returns on investment. The platform is easy to access and allows participation in its refundable sales with zero collateral—no token staking involved. Investors can also join pre-sales backed by leading funds for free.
The platform helps reach the deeper layers of the crypto market, where high-return assets are found—ones capable of delivering substantial gains in a short period. Since these assets are typically priced low, they offer lower entry costs and higher upside potential. Investors can enter the market with modest funds and accumulate millions of tokens. The good thing about such a strategy is that a small uptick in prices implies significant profits.
Altogether, while exchange liquidity is crucial to establishing trust in the exchange, it has less to do with making its tokens valuable. Coming to a robust exchange and trading only in reputed assets would mean moderate or below moderate returns. Investors can leverage platforms like Coin Terminal to identify undervalued yet high-potential tokens to make the most of their modest investments and even earn supernormal profits.
