If you’re looking to lock in a quick profit on a cryptocurrency investment, jump into any token as soon as possible after a token burn is announced.
The chance of a price increase after one day is a perfect 100%, according to a study released by social trading and brokerage firm eToro on Oct. 14. But jump in quickly. After a week, that’s down to just 50%.
The second-best bet is on merger and acquisition news, although you’ve got a bit more time. While the one-day probability of a price increase is 65%, over one week that improves to a “remarkable” 90%.
Those are among the findings of eToro’s Q3 2020 quarterly report on “What Moves the Prices of CryptoAssets.”
Based on information about the impact of significant developments drawn from digital asset information provider The TIE’s Crypto SigDev platform, the report looks at the probability of a price increase within one hour, one day, and one week after 15 separate types of events.
These are mergers & acquisitions, funding, halving, employment changes, partnerships, staking, announcements, illicit activity, listings, token burns, forks, regulatory announcements, mainnet launches or upgrades, airdrops, and 51% attacks.
Profit by the week
The biggest price increases—and decreases—are in the one week range.
For locking in big profits, mergers and acquisitions are the best opportunity, with the average one-week change an 8.23% increase—far and away better than anything else. They also lead the one-day change list, with an average increase of 1.32%.
“This outsized return is likely due to the fact that most token-related M&A news are tightly held secrets,” the report said. “Further, M&A in the context of tokens are typically done to add further value to an ecosystem. For instance FTX’s acquisition of Blockfolio brought a significant number of additional users into the FTX ecosystem.”
The one-week price surge in that case was 33%, it added.
Second on the M&A list, strangely enough, is illicit activity, with a 5.59% one-week increase. That’s followed—far less strangely—by funding announcement (+4.21%), mainnet launches or upgrades (+3.08%), and employment changes (+2.69%).
The price drop list is led by 51% attacks, which see an average 3.32% decrease over a week.
As for token burns, the lesson of the report is get in fast, get out fast. The average price change after one hour is up 1.15%. After a day, that improves to 2.13%. But after one week, the price is down an average of 1.18%.