Update: The Byteball Airdrop Has Been Permanently Cancelled
When a new cryptocurrency venture wants to launch and distribute its tokens, the vast majority achieve this with an ICO. However, in order to encourage adoption and fairness, the Byteball development team made the decision to distribute 98% of all Bytes and Blackbytes for free via community airdrops and cash back to merchants.
The distribution occurs every full moon, with investors being awarded with Byteball in the following proportions to their Bitcoin and Byteball holdings:
- For every 16 BTC you receive 0.1 GB
- For every 1 GB you receive additional 0.1 GB
Basically, you will get an extra 10% of your Byteball holdings free, as well a % for your BTC holdings. All you have to do is download the Byteball wallet – which is awesome might I add – and chat with the Transition Bot in the Bot Store to link your addresses. Sounds great, right?
Byteball Alternative Investment Strategy: A Lesson in Supply and Demand
Whilst getting an extra 10%+ Byteball sounds great, there is an alternate byteball investment strategy based on simple economic theory that could be more profitable. In the run up to every airdrop, the price is driven up due to high demand for Byteballs as investors look to claim free coins.
However, as soon as the drop occurs, the market becomes flooded with new supply. Economic theory tells us that this will lead to a fall in price, but how much can we expect it to drop? In order to answer that, we will need to take a look at how the market price has responded to past airdrops.
Nov 4th Airdrop
Before the last airdrop on Nov 4th 2017, the price peaked around $230. Just two days after the drop we saw the price fall to a low of around $150 on the Nov 6th, whilst trade volumes simultaneously doubled. This supports the theory that the price fell due to investors cashing out and supply flooding the market.
Source: Coinmarketcap
More interesting is that Byteball holders received 20% distribution in the airdrop, but the price fell 35% only 2 days after it. Therefore, it would have been more profitable to buy sometime during the run up, sell the day before the drop, then buy back in after the crash. But what about previous airdrops? Is the trend the same?
Sep 6th Airdrop
The Sep 6th airdrop paints a less obvious picture as there were other market forces at work. Following an all time high on Sep 1st, the whole market proceeded to crash by around 45%, hitting a low on Sep 15th. Unfortunately, this coincided with the timing of the airdrop.
The Byteball price still dropped from around $350 on Sep 6th to $276 3 days later, representing a fall of 21%. However, due to the bear market at the time it is less reliable to draw the conclusion that the price decline was due to the airdrop.
August 7th Airdrop
The Aug 7th airdrop shows the trend a lot clearer. As you can see in the run up to this drop, the market was relatively stable, with the Byteball price hovering around $580-$600. Then, within just one day of the drop, the price had tanked down to $335 at its lowest. This time representing a depreciation of around 51%. Trade volumes also picked up massively.
Source: Coinmarketcap
July 9th Airdrop
The July airdrop looks very similar to August, with a relatively stable price in the run up and then a sharp drop of around 34% within just a couple of hours. We aren’t going to go any further back than this, but the June 9th airdrop shows pretty much the exact same pattern as July, falling a similar % in a short time. If you want to check it out, head over to Coinmarketcap.
Source: Coinmarketcap
The Take Home Message?
Based on past Byteball airdrops, it would seem that the price regularly falls by a significantly greater margin than the amount of free Byteball investors receive. As such, it is probably more profitable to buy during a low in the run up and sell just prior to the drop. Additionally, if you hold BTC you will still be able to get some Byteball in the airdrop even if you sell!
One other thing that is worth pointing out is that correlation does not equal causation and nothing is guaranteed, especially in crypto. Timing the buys and sells correctly adds another layer of risk, plus we also do not know what other market forces might be at work. Therefore, if you are risk averse the safest option is likely to hodl through the temporary crash and cash out once the price recovers.
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