Following whales only sometimes pays off, but Trump might be different.

He is unusually candid in stating his intentions to enrich his personal position, and he has the means to facilitate that goal.

This feature of his personality has led to a surge in price for crypto projects related to Trump and the holdings of his family members in World Liberty Financial.

Still, maybe his projects are overheated in the wake of his election. Let's use an analytical framework to find out.

1 The Declining Bands Rule

We all recognize that some coins rise too much too quickly. The Declining Bands Rules give you a rule of thumb to determine if that's happened.

For larger coins, such as $XRP, you want to use the 20/40 rule. If the price of the coin would decline to the 200-day moving average, how large of a drop would that be? In this case, you'd lose 45%.

For larger coins, a potential decline of 20% tends to mean that you're late to the trade. At best, you'll have dead money. If they reach 40%, they almost always decline more.

$XRP mania reached a point where it would potentially decline 61% before reaching the 200-day moving average. For a large cap coin, that is historically very rare.

When you reach those upper limits, it has historically made sense to take some profit. I wrote widely that $XRP was poised for a decline and it did decline.

For smaller coins, because they are more volatile, the 30% / 60% rule applies. It's the same idea, just with different possible % declines.

Remember, these are rules of thumb, and there are exceptions.

2 Solana ($SOL)

$SOL is the blockchain supporting the $Trump meme coin.

If you were to sell when $SOL dropped to the SMA 200, you'd be risking about an 8.6% decline.

Recent price activity suggests that the coin could rise 30% or better. This means that your potential Risk to Reward ratio is roughly 1:3.5.

Anything better than 1:2 makes sense if you have about equal odds. Technically better than 1:1 with equal odds, but cryptos are so volatile that I look for 1:2 or better set-ups.

3 Tron ($TRX)

Justin Sun's Tron is integral to the Trump family's projects over at World Libert Financial.

Its current price positions it for a potential 16.77% decline. But its recent price history suggests that it could climb better than 33% from its current level.

This satisfies our 1:2 criteria and makes for an interesting Trump-coin setup.

4 Ethereum ($ETH)

The WFL loves $ETH. Currently, it would need to rise some 6.25% to be tradeable using these rules of thumb. The idea, to recall, is that you start buying the first day after a coin closes above the SMA 200

Otherwise, you are trying to catch a falling knife--which is tricky. Better to give up the potential 6% gain and wait before jumping into this one.

5 Concluding Thoughts

I think it makes sense to follow the Trump trade narrative, but only 2 coins of all those associated with his projects or his family's projects are today within the "buyable" range -- at least according to the 20/40 and 30/60 rules of thumb.

I'm not recommending any of this, but I am teaching you how to use an analytical framework. Cryptos are risky, and you'll probably lose all your money if you invest. DYOR.

Happy Trading!

-Sebastian Purcell, PhD

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