How useful is Volume/Market Cap ratio when selecting a coin?
How useful is Volume/Market Cap ratio when selecting a coin?
I’m looking at AI coins like 0x0, GPU, HashAI and PAAL AI that I like but their volume/mcap ratios are abysmally low which makes me worried to touch them.
One one hand, I feel a higher ratio is nicer since it likely means more liquidity to enter and exit positions, while signalling positive market interest in the token.
On the other, I feel this volume is likely manipulated anyway and just signals speculation, which could cause it go both up or down. A lower volume could also mean increased utility and holding strength, which are both bullish. But again, that could mean just a small amount of capital is required to manipulate the price (eg: wash trading).
What are your thoughts? Is this metric useful? If so, how do you read / use it?
Since you’re looking at VOL/MC, remember that total crypto daily trading volume is at $85B now compared to around $350B just a month or so ago.
It was as low as $38B yesterday.
When volume picks up again, those metrics will change a lot. Volume changes before marketcaps do.
In general, I like to see a trading volume of around 5-10% the MC.
You need to find the unlock schedules and make sure you sell before they start occurring. A lot of these kinds of coins can go up really high at first, but you don’t want to end up bagholding. If you can’t find the unlock schedules don’t buy.
I look for low market cap coins that have good tech/program’s rolling out. I hold PAAL AI myself. I bought FET when its market cap was low and it’s been good to me. With a low market cap, it’s much easier to get a 10x return in a bull run.
Easy way to work out if most of the volume is wash is to go onto the exchanges with the highest volume and check what trading looks like. If the order book is mega wide, but there is a suspiciously consistent flow of trades all happening right at market mid, then that is all fake. Exchanges like huobi are full of this sort of thing