Why New Coins (Almost) Always Do Better Than Older Coins

When friends of mine from TradFi get into crypto investing, I’m surprised at how consistently they choose to invest in altcoins that are a cycle or more older, and forgo the newer tokens. When I ask, they say “well it’s a bigger risk to go for the newer things. I’d rather invest in something that has a track record”.

That’s technically true, but it misses a key element: the potential upside. Relatively, newer things always have a higher upside than more mature projects. And yes, they have higher risks associated with them — but even then it’s worth going for the newer coins / NFTs / projects.

Although newer tokens = higher risk, older tokens = more bagholders. The older assets, especially if they have been through at least one market cycle and have had a chart with a blowoff top, are filled with market participants who bought high and are desperate to get out of their position on any pump. This means there is selling pressure pushing down on every potential rally, causing it to stay in a range instead of breaking out to new highs.

Since crypto is a momentum market where the price action drives attention to assets, each failed breakout makes the token look relatively weaker to the rest of the market. This signals to traders that it’s not worth deploying capital, which results in lower volumes, which further moves the token out of the spotlight. All of this results in older tokens receiving less attention, less participation, less capital flow, and ultimately less upside, until the previous bagholders have completely gotten out.

Newer assets have the opposite: no bagholders, no stress associated with buying high, and recent all time highs. This attracts attention, which brings in capital, which creates momentum, all creating a positive feedback loop to generate upwards price action and new all time highs.