Nicholas Merten from DataDash has shared a critical perspective on the cryptocurrency market, highlighting a phenomenon he calls the "slow rug." This concept is essential for investors to understand, as it can significantly impact their portfolios.
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Merten explains that the slow rug is a gradual process where the circulating supply of a cryptocurrency increases over time, often without the investors' immediate realization. This supply increase can dilute the tokens' value, leading to stagnation or a decline in their prices. He points out that this is a common practice among many altcoin projects, where insiders and early investors slowly sell off their holdings, creating a steady supply of tokens in the market.
One of the key examples Merten discusses is Chainlink. He notes that despite its technological advancements and market cap stability, Chainlink's price has not been able to reach its previous highs. This is primarily due to the periodic unlocking and selling of new tokens, which increases the supply and puts downward pressure on the price. Merten emphasizes that this pattern is not unique to Chainlink but is prevalent across many altcoins.
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Merten also mentions Cardano and XRP as other examples where the slow rug is evident. He explains that Cardano's continuous increase in token supply has prevented it from achieving significant price gains, despite its market cap being relatively stable. Similarly, XRP has struggled to reach its past highs, partly due to the consistent selling of tokens by Ripple Labs.
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The slow rug phenomenon is not limited to well-known cryptocurrencies. Merten highlights that even meme coins, which are often seen as purely speculative, are subject to similar practices. While meme coins are more transparent about their speculative nature, they still suffer from the same issues of supply dilution and insider selling.
In conclusion, Merten advises investors to be cautious and aware of the slow rug phenomenon. He suggests focusing on momentum and market signals rather than holding onto tokens for the long term. By understanding the dynamics of supply and demand, investors can make more informed decisions and avoid potential losses in the volatile crypto market.
