Crypto Gems “Accumulation & Distribution” Getting Ready for Takeoff

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Which of these Crypto Gems will fly!?

Crypto Gems are in style! With trading, you can gain first-hand experience in market dynamics and economics at work. A great example of translating economic cycles into price development can be seen in the crypto market. A common pattern is the price trading sideways for some time with small movements between the bands. Then, a sudden breakout happens, turning the sideways movement into an uptrend. Did you see this behavior before? Chances are you have seen an example of accumulation and distribution.

An example for Accumulation/Distribution

Please have a look at this $NEO chart below for an example:

Crypto Gems Accumulation/Distrubution
Crypto Gems Accumulation/Distrubution

This consolidation phase was pretty long. $NEO, that top coin it is with many fans all over the world, did not do anything for weeks (this is a daily chart). You can see it has moved in the low range from the lower band to the upper band to the lower band – then breakout. Many people had bags full of $NEO and were waiting for something to happen. The weak hands sold, as they got impatient, the other guys bought more on the dips and accumulated holdings. No matter what Crypto Gems you hold you are likely to catch one BIG WINNER sooner or later.


Accumulation means increasing your overall stakes on a particular asset in chunks whenever the price gets down. Some more experienced traders also buy at the lower band and sell on the upper band to increase their equity for this accumulation process, as they suspect the price to be ranging for some more time. This way, the buying power of larger investors increases over time, and the up spikes will become bigger. They accumulate more and more buying power until they buy with the total accumulated wealth to ride the breakout wave.  If you take a look at the chart on the hourly, you can see the action at the bands (there are better examples, but you get the idea):

Crypto Gems "Accumulation Phase"
Crypto Gems “Accumulation Phase”

And then – boom, mars mission:

Crypto Gems breakout
Crypto Gems breakout

Consolidation Phase

Of course, you can’t make a rule out of this and accumulate on every coin that is simply ranging. Firstly, it is important to know that it is very likely that after a consolidation phase, a breakout will happen. Unfortunately, this can happen southwards as well. However, in crypto, the nice thing is that people buy and sell pretty emotionally. You surely heard the saying, “Buy the rumor, sell the news” – this is nowhere more true than with crypto. Most accumulators know that some news will come, which works as a catalyst and empowers the price to break out. I repeat, many Crypto Gems can have charts, so keep this in mind.

Another, more advanced approach for experienced traders is to check for their crypto gems in a downtrend that comes with a good buying volume. This is a nice signal that it could turn soon. Side note: increasing buying volume within a downtrend is called divergence, and we will have another article up soon explaining this in more depth.

Crypto Gems: Finding the right entry point if you missed the accumulation phase

Check out the following chart, and it is an example what is happening right now, while we are writing this:

We saw a huge rise here before on $XLM; then it dropped into a sideways consolidation phase. This, by the way, is the typical behavior for legit coins. Low-volume coins that are often exploited for pump-and-dump actions would drop to where they have been before. With legit coins, the prices of the crypto gems tend to consolidate at a higher level than during the last consolidation phase (if nothing drastic happens, like bad news, postponed releases, etc.).

Connect the highs and lows to form a flight path, and you will notice a pattern called a triangle. In theory, the next breakout of one of our crypto gems might happen once the price breaks the upper resistance line, so once we have a finished bullish candle above the upper line, we might have a good entry to enjoy the breakout. To refine your entry, you might want to check the order book and the buy/sell walls. Once the upper resistance line is broken with a full body candle (if you had the patience to wait for it – trade still running), see what happens next:

Crypto Gems breakout xlm trade

The Theory behind Accumulation / Distribution

But let’s take a look at the concept of accumulation/distribution in Layman’s terms as it’s important to have a full understanding of how it works so you can better understand the way prices move in the market across each coin. It is really basic economic knowledge that applies here, everyone in retail knows a story or two to tell about this process, which can be translated and applied to crypto gems trading.

Firstly we have to understand the background of a price movement. This is best possible in the case of owning a unique company since it can provide an insider’s perspective. For example, let’s say your company is the only one that produces a particular product in your city/town and requires a special license from the local government.

The Product

The product itself might have a special value, and the number in circulation might remain the same, for example. This picture shows the purpose of crypto gems and coins and their total supply in the markets. It is a special, unique idea that the project behind the coin follows. To start using it in real life, it needs backing from an industry that uses it (for example, with $POWR or $XRP).

When people and companies feel that their product sales are unrewarding because of low sales or profits, they might decide to take action. Other factors include operating expenses, including the store, staff, warehouse, etc. When this is the case, it’s often necessary for a company to think of creative solutions to boost revenue. This is critical since it will help the company boost sales and be more competitive.

The Crypto World

In the crypto world, this translates to an oversold coin hovering on low levels, which is often the case for new ones. They need to create a buzz with one of the crypto gems’ upcoming news: partnerships, adoptions, and technical improvements are good examples. When these events are announced and widely publicized, they grab the interest of the average trader, who may then consider making a small investment.

However, when customers learn a company’s product will stay in small supplies it can help to boost sales if people know the supply will shrink and the value increase. This company then benefits because it knows its sales and revenue will increase. This, for example, is the case when a particular project announces a coin burn to happen anytime soon. The supply of the total available coins decreases; therefore, its value will rise if the demand increases. It is basically a catalyst for the common principle of supply and demand. Less supply + increasing demand = rising perceived and actual value.

The Company

What happens if the company announces a price increase? This can still result in higher sales as the customers believe there will still be a shortage of the product. In fact, knowledge of this fact can even result in higher sales as customers will be concerned about not having access to the particular product.

As the weeks continue, you can increase your prices, but sales will continue due to the worry about low supply. Some customers might decide to sell products back to the company in order to turn a profit. However, that’s ok since there will still be tons of buyers. Translated to our coin, this is the structure behind a forming uptrend and also shows the power of FOMO (fear of missing out).

However, the potential problem of selling more items is it can cause the warehouse’s inventory to decrease due to high sales. It can also result in a drop in sales volume. You could keep raising prices so consumers think the situation hasn’t changed. The problem is that the original plan can become overly successful. So, the key is to convince customers to sell back products so the company can keep going. For our coin, this means being aware of selling when the price becomes very much overbought / overvalued.

Imagine a bigger company is setting up a shop in the niche of ours:

It can become tough for small companies to compete with them. This can cause several problems for the company. That includes making it tough to compete with big companies, and also, the product’s value might plummet very fast. The situation can cause customers to ask the company to buy back their products. The products are the same, and there’s a small supply. If many people are selling back the products, you can drop the price to boost demand before the products become worthless. 

When the Price Drop

When the prices drop, this can result in tons of people selling back the products and the company buying back a huge number of units. After a couple of weeks, the panic selling will end since some customers hold onto the products despite the pressure. This model is also sometimes used in the world of cryptocurrency (and, originally, stocks). For example, look at the SPECTRE token buyback program to see how this can be done. This is one of the Crypto Gems we speak of here. 

The company can then start selling the products again at the past levels from the warehouse since it’s full of stock due to the buy-backs. This results in the company having to deal with low sales for a few months since long-term sales can be sky-high. The company’s overhead costs can be paid, and the company can also afford things like bonuses. Then, the company can start the process again in order to get more increasing results.


To sum up this analogy, the moral of the story is that traders who purchase coins during the accumulation phase have a big advantage since when volume increases, they can set their own selling prices. Never lose the complete picture out of sight. In the world of cryptocurrency, traditional market economics still holds and can be leveraged effectively. The key is recognizing that trading entails understanding the disparities between retail and wholesale pricing and using this knowledge to maximize profits and find the next-gen coins.


This article is for educational purposes only. We are no financial advisors. The information provided from SmartOptions is for informational purposes only. It should not be considered legal or financial advice. You should consult with a financial advisor or other professional to find out what may be best for your individual needs and risk tolerance.

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