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A number of cryptocurrency exchanges (notably Binance and Kucoin) often have trading contests, most often for newly listed cryptocurrencies in an effort to drum up some publicity and interest in the projects. The amounts on offer quite be quite lucrative for people who manage to get into winning positions... however, to land in the top trader spots requires a vast amount of both capital and time.... or at the very least, a vast amount of capital and access to trading bots! However, more recently both Binance and Kucoin appear to have realised that most people aren't interested in the trading contests as the top spots are completely out of the reach of regular people... to that end, they have started introducing a different tiers of contest rewards to try and entice people to take part...

This post is a quick run down of the new contest styles and a quick and dirty analysis of how best to participate in them to get a return.... without making too much of a loss!

For an example of the trading contest style and parameters, see this recent contest at Kucoin: https://www.kucoin.com/news/en-credits-trading-competition

Contest Types

Volume based Rewards

Let's not kid ourselves... you will be competing against bots and some serious wash trading on the orders of magnitudes faster than a human trader is going to manage. Volume based trading is completely out of the reach of the small and casual trader. You need a serious amount of BTC to keep a constant flow of trades going... and you run a huge risk of making a large BTC loss (and holding lots of a worthless new coin...) as the initial listing of a coin is going to be extremely volatile. Usually the listing of a project on a major exchange such as Binance or Kucoin is a chance for early investors to dump their backs onto new and unsuspecting retail investors... don't be that guy holding the bags.

Profit based Rewards

Well.. the small trader has a better chance here... especially if you are savvy and pretty good with the trading, you can get lucky here. However, again the volatility is the key here... you might be able to get ahead of other retail investors... but the elephant in the room will the early investors aiming to dump a huge amount of crypto to recoup their initial investment. So, expect the price to plummet, with a huge sell pressure from early investors countered very briefly by retail investors with quick profit in their eyes (or a chance for the rewards...).

There are two ways that this reward tier can be structured. Total Net Profit and Percentage Profit.... Total Net Profit... avoid it, unless you have a huge amount of BTC that you can dump into the game (of which you are highly likely to take a huge BTC loss...), you don't stand a chance here... Percentage based profit is better... but again, you are running the pretty high risk that you are trading off your valuable Bitcoin for a crypto that is untested and is dumping fast! Not really a great proposition for a reward that is likely to be smaller than your losses!

Participation based Rewards

This is the best way for a casual and retail player to get some rewards... Often it is structered as a minimum trade amount over the set time. Read carefully... Sometimes it is total buys/sell... sometimes only total buying volume... sometimes you need to be holding a certain amount at a particular snapshot time.

For the Total Buy/Sells or buying volume (generally on the order of 50 euros)... it is probably best to just take the "taker" fee hit and buy and sell only a tiny bit above the minimum amount at the market price. Posting a limit order is fine... but due to the inherent volatility of a newly listed coin, you could find yourself on the wrong end of a 10-20% swing... or if you are lucky, you could find yourself on the right side! However, with the taker fee (0.2% twice for the buy and sell order....) and selling at a loss (on the order 0.5-1%)... you can make the minimum amount for a guaranteed small loss (on the order of 0.5 euro in Bitcoin)... for me that makes more sense than having the danger of holding a bag of unwanted coins.

For the holding snapshot type of contest... well, this is much more dangerous, as it requires you to be holding the bag of unwanted altcoin at a specific time.... and at that time, there WILL be a fast and furious dump as everyone wants to get rid of the coins... I would suggest avoiding these ones, UNLESS you actually want to hold the featured altcoin anyway, in which case it is an easy way to bolster your investment with a little bonus.

Advice and Conclusion

The critical thing to keep in mind when taking part in these contests... is the fact that most often, you are going to be trading valued Bitcoin (BTC) into and out of a random crypto with unknown (and likely less) worth. Thus, your objective is to exit the contest window with a minimal loss, which means that you are going to be minimising your risk against being caught by a sudden swing and finding yourself holding an amount of unknown and untested crypto at a large BTC loss.

There are few tips and tricks to avoid doing this...

... don't trade in the first day or so of a contest opening up. When a new listing goes up on Binance or Kucoin it is a chance for initial investors and the project team to recover investments or to get some project capital flow going. Both these reasons for dumping the coin are entirely legitimate, investors must try to recoup their initial investment... that is the sane thing to do... and project teams need "real" USDT or BTC or something with tested value to keep the project running. Seen from this perspective, a huge dump at the start of a listing is to be expected. Of course, this is matched against the desire of new investors to try and get a foothold into the last hyped moon-coin... however, in general, the weight of selling is going to be outweighing the desire to enter. So, that picture above... Nope, you don't want to be the lucky fool who got in at the top of that starting red candle!

Even after a few days... the volatility is going to be a bit strong.... choppy graphs will be the norm (like the rest of the crypto ecosystem....) and volume is mostly generated only by the contest! Look at both the graphs... volume is pretty much non-existent... which means that the price can swing pretty hard and unexpectedly with little notice. Again, keep our central tenet in mind... DON'T LOSE BTC! DON't be tempted by the chance to make a profit... there is NO VOLUME! This means that posted limit orders might never execute and be stuck a long way away from the market price when a move is on.

So, with that in mind.... it is best to stick to market orders and fast trades.... to minimise any time exposure whilst holding the bags of altcoin... even if that means selling at a small loss as fast as possible and eating the higher fees due to placing taker orders rather than posting maker limit orders. After all, you could sell at a 1% loss (probably less) and a 0.2%*2 fee making for a total of around 1.5% percent loss on a roughly 50 euro order. This is a guaranteed loss, but the rewards are generally higher than this loss... and it is infinitely preferable to holding a bag of altcoin with a 10-20% swing against you!

The last tip is to trade no more than a bit above the minimum for participation... you won't get much more by doubling your exposure...

There is a bit of a word of advice here... this tactic... whilst being as safe as possible still can see you on the wrong side of a swing.... we all know that these things can happen on the order of seconds... so, there is some risk. Before initating the trade pair (buy and sell), study the order book.... and see that there are enough buy orders to soak up your market sell order... othewise, it won't fully execute... leaving you with a partial bag of altcoins.

Keep in mind, this is technically akin to a wash trade and not really in the spirit of a real marketplace trade... and so there is a chance that the exchange will deem you trade to not comply with the rules of the contest. In which case, you won't collect a reward... however, in the past, I have found it to be reliable... and it is an easy way to pick up about 5-20 euros worth of an altcoin for relatively little effort. After which, you can just hold it as a long shot bet... or immediately cash out for BTC/USDT.

Anyway, usual disclaimers... do your own research, and make sure you understand that you are RISKING capital by taking part in these contests. DON'T think it is a guaranteed way to make a profit.

Referral Links for Exchanges running contests

Binance

Kucoin

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