How Binance trade competitions affect token prices / NANO trade competition /

I wanted to share my observations on how Binance trade competitions affect token price.

As an example we will review current ongoing NANO Competition. Binance to Giveaway 15,000 NANO for those 53 people who trade most volume in a week. You can read details here https://support.binance.com/hc/en-us/articles/360003308572-NANO-Competition-15-000-NANO-To-Giveaway

If it's not your first time observing the competitions you know that in general there is a spike in the token prices right after announcement followed by a significant drop in price. Let's deep dive into the logic of the traders with the specific timeline (converted to EST time zone)

Thu 5/3/2018 4:26 AM - Binance announces NANO trade competition on its website and twitter account. Competition start time is just in 16 hours (20pm eastern time). Binance doesn't want to give you much time to add some free funds to get ready for the competition. If all of your funds are tied as investments in some other coins then you will need either exit those and trigger a tax event or try to add new fiat to your account that in most cases takes longer than 16 hours if we talk about meaningful amount. Long story short, only traders with free pool of money (presumably whales) are ready to trade quickly.

You would think that price action should start in 16 hours when the clock starts ticking and all your volumes are counted towards competition. But something else happened. In the minute the announcement was made huge volume poured into NANO leading to prices spike of 15% in 45 minutes. Approximately 2-3mln NANO ($20-30M was bought in just 60 minutes)

I believe the reason of the spike is simple. In order to sell something you don't own I got to buy it first. If you know that there is a competition coming and you plan to participate you want to be the first who buy because others will have the same incentive to buy first in order to be able to sell later and increase trading volume. So, our lesson learned #1: YOU HAVE ONLY 3-10 MINUTES TO MAKE MONEY ON AN ANNOUNCEMENT. To be able to do so you should either have a bot that is able to read announcement or just be a day trader sitting in front of your computer daily/nightly. It's still reasonable time comparing to NADAQ trading where everything happens in seconds.

But keep reading. There was another 10% uptick in price when the competition actually started, 20pm EST time. As you can see on the chart below some people (I would call them less sophisticated) decided to trade first 2-4 hours when the competition actually started to have their trade volumes counted towards final results. To be honest, I made the same mistake.

What happened is that those who bought in the first wave (call them sophisticated traders) have now had buyers for their volume. And time started ticking for them to unload 2-3 mln of NANO purchased. Remember they only have 1 week to unload the volume, assuming they are not really Hodlers, but rather one week traders to get a prize. As a results, those who started trading first hours of competition were buying at the top letting whales to partially unload their positions. As of time of this writing NANO is down 23% from it's high at the beginning of the competition.

The NANO price is back where it started. Sophisticated traders not only made profits on buying low selling high, but also traded significant volume in those 2 days. Regular people or new to the competition could be burned by buying at the beginning of the competition hoping for further price increase, but it's not how it works.

There are still 5 days ahead before competition concludes, therefore there could still be another wave of buying from whales with another 15-20% spike to increase their trading volume. As you may know we saw this scenario with GIfto (GTO) on Binance recently.

If you stuck with NANO which you purchased to trade in the competition and now keep it at a loss, I would recommend keep waiting for another wave or until competition concludes. History shows that prices reach fundamental level after trading competition distortions disappear. Ontology (ONT) would be a good example, which dropped on competition, but raised 10x after the competition concluded.

Let me know if you agree/disagree with my point of view or if you want me to discuss what trading volume I believe should bring you to the top 53 to win a prize.