One of the most commonly asked questions I get is ‘Should I chase Airdrops?’
Almost always the answer is ‘no’, followed by a very quick ‘well, yes!’. Today I will explain why and give you and example or two to boot.
BUY THE RUMOR SELL THE NEWS
We are probably all familiar with this saying. More often than not we hear that you’re going to get ‘something for nothing’, or a ‘huge announcement is incoming’ (weird thing to announce in advance, unless you want to hype the price, right?), and then follows the big news or announcement, and in this case the airdrop. People wait for the snapshot, and dump their original purchase as fast as they can. Lets use Medibloc as a case and point as its happening now and is a great live study of this theory.
Here is the price action leading into the Airdrop.
Here is the 30 minutes straight after the snapshot
It dropped from $0.03 USD to $0.0138 USD. That’s well over 50% of its snapshot value. Let’s look at how you can play the Airdrops and more often than not come out on top.
1. The Trader
Whether you believe the project you are investing in has long term value or not, by simply following one of the many crypto announcement calendars you can see which projects will be doing upcoming airdrops. Let’s assume I don’t like this project for the first scenario.
Traders will time their run. They will look to get into the position well ahead of the snapshot and HODL until near the announcement. As highlighted here.
This is a simple example of how to make 50% on a flip and is very common in the experienced traders ‘bag of tricks’. In a down market, I can use this profit to buy other tokens or coins I like.
2. The Believer
For this next scenario, let’s assume I love the project and I want to either enter for the long term, OR I am already in. I would repeat the play above to the letter. Yes, that’s right I would sell at the same point, even if I believe in the project. But why? You’re about to get a free airdrop!
If I buy more OR start my initial entry at the higher low in the above graph, I can then sell at the point indicated on the graph above, generally between 24 and 12 hours out from the snapshot.
Then, I buy back in here:
But what about the free ‘airdrop’ tokens?
3. The Believers Dilemma
Ok. So you have bought in, held for about 10 days. You have increased your stack by a good 50% and at the bottom of the dip post snapshot, you have 2 options. a) You buy at the dip and increase your original stack by 50 to 85%. Simple. b) You buy back your original purchase amount, meaning you have a 50 to 85% profit, depending on how severe the dip. In this case I was able to make nearly 70%. Let’s say you REALLY like the airdrop tokens and you’ve DYOR and think they are winners. You wait for them to hit the exchanges, take your profits and wait for the same dump. Why would the ‘airdrop’ tokens dump? Because they are free. People wait for the free money. Do the same thing, wait for the dump, watch the volumes to stabilize and buy. You end up with a nice stack of tokens that you got at a good price and ‘airdrop’ tokens you got for free.
4. Noob Blues
We have all been there before. ‘The Noobs Blues’ is when a person buys in near the top, due to FOMO and greed and thinks, this airdrop will be epic. They then watch the price of their tokens plummet post snapshot and HOPE that the price of the free ‘airdrop’ token, can be at least the difference on what they lost, so they can break even. This is rarely the case and you will be forced to hold for a long while to make your money back, IF at all. Don’t forget, you are playing against the above players. They know how this game goes.
5. Prison Rules
It’s pretty simple. This is a zero sum game. Smart traders will prey on your greed. They will exploit this weakness and make money from this fact. In almost all airdrop situations, the price of both the original token and the airdrop token will plummet after the snapshot and listing respectively. So eat, or be eaten. There is only one way to play this game. You need to decide, are you a trader or a believer?