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Is a token overpriced? Pancakeswap might let you know

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Written by   11
1 year ago

Speculation strategy

If there's a pool for a token listed on pancakeswap, you can use it as a reference to tell if the market price for that token is under or overvalued right now. Two coins are demonstrating my theory as we speak: SPS and AXS.

Splinterlands' SPS has recently served us as a prime example of a coin we can recognize at launch as overpriced. As soon as the first airdrop hit, its pool on https://pancakeswap.finance/pools showed an APR of 500%. Everybody was happy as 1 SPS approached 1 dollar, but of course, it dropped all the way down to 1 SPS for 0.30 USD.

When SPS dropped in value, pancake's SPS pool approached 100% APR. Sitting slightly above other pools' average, it should still drop a bit, although not necessarily by 10%. Meanwhile, you can see AXS has hit a price spike of 40 USD, which is very expensive, compared to its 15 USD mark at the beginning of this month. However, it's still going up, even though its pool is already as low as 66% APR.

Assuming I'm right about this method of analyzing prices, this means AXS's market value is going to climb even further. Although right now I'm only theorizing what I've observed, speculating on AXS for at least 5% of its current value in the next couple of days would probably be a profitable bet. I'm going to get some myself then let you know about the results.

Using this "market analysis with cake pools" theory, we assume purchasing popular tokens associated with low APR cake pools are on the rise, while popular tokens associated with high APR cake pools are dipping soon. Of course, this strategy fails if a token is a scam or if it's being abandoned, because we only expect to deal with tokens under stable development.


Image source: screenshot from https://pancakeswap.finance/ taken by me

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Avatar for felipejoys
Written by   11
1 year ago
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