Bitcoin and Ethereum price analysis

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Vlad Antonov
Sep 4, 2020

On Thursday, as the Dow fell more than 800 points and many tech giants ended in red, cryptomarket continued its plummeting, which caught many bullish investors unprepared. After 2020 stock market crash both stock markets and Bitcoin were in a close correlation and both surpassed pre-Covid levels by mid-summer. So was it as unexpected as many people tend to believe? Perhaps, the on-chain data can help us to answer this question.



Source: CNN Money

Almost a week ago, I was able to spot several alarming bear signals which were coming from Santiment's on-chain data. While there were some mixed bullish and bearish signs, the most fundamental metric was telling me about upcoming correction louder and louder as BTC price moved closer to the $12000 mark. What can we conclude from this, and what does the on-chain data tell us about the current crypto-market health?


1. Daily Active Addresses (DAA) vs Price Divergence


Bitcoin DAA vs Price Divergence

Starting from early August 2020, we were continuously receiving bearish signals that the current price does not correspond with daily active addresses. This indicated that the market was growing purely on a speculative nature that didn't match the network metrics. Any significant divergence between fundamentals and price ends in painful corrections both for crypto and traditional markets.

BTC DAA vs Price

On a positive note, even when Bitcoin price plummeted, Bitcoin DAA didn't change, which means that Bitcoin is coming closer to its healthy bullish mid and long-term trajectory. While overall DAA vs Price is still in a bearish zone, the situation is stabilizing surprisingly quickly, indicating that we are unlikely at the end of the bull run


2. ETH Network Growth


Without a doubt, ETH and Defi are in the spotlight this year. It means that it's important for Ethereum blockchain to keep a balance between the price and network growth as to fuel the bull run its network needs an increasing demand and adoption. Network Growth shows the number of new addresses being created on the network each day, which helps us to identify when the project is gaining or losing traction

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Price vs Network Growth

The graph shows us that ETH price is still ahead of the network growth, which means that ETH won't be able to sustain further bull-run continuously unless Network Growth will get back on track.


3. BTC MVRV(60-90)


Market Value - Realized Value (MVRV) shows the average profit or loss of those holding BTC tokens which moved in the last 60 days, based on the price when each token last moved. Example: if MVRV = 2, then these holders are, on average, currently 2x their initial investment.


BTC MVRV (60)

After almost a $2000 price drop, both MVRV(60) and MVRV(90) are around 0.93; While this doesn't confirm a bullish sentiment, it's a good indicator that bearish pressure is weakening, as investors are more likely to hold their assets


Summary:


- BTC and ETH DAA remains in the bear zone, price volatility and periodical corrections are expected.

- DAA vs Price stabilization indicates that BTC is unlikely to drop much further from 9400-10200 range.

- The lack of a network growth on ETH blockchain will likely cripple its bull run and simmer down bullish euphoria. That being said, network growth is likely to surge closer to the ETH 2.0 rollout date, hence I anticipate further price growth and the second round of DeFi hype.

- MVRV both for BTC and ETH looks much more "healthy" and more likely to incentivize users to "HODL" their digital assets,

- Bitcoin reacts similarly to a stock market which means that we should watch stocks more closely as the present situation is quite similar to that of 1986 and 2000 when the S&P 500 fell 8.5% and 5.4% in September after a bullish August.



Disclaimer: The content is for informational and educational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained in my post constitutes a solicitation, recommendation, endorsement to buy or sell any assets

BTCETH
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Vlad Antonov
Sep 4, 2020

Thanks for reading!

If you enjoyed this insight please leave a like, join discussion in the comments and share it with your friends!

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Assets from this insight

Bitcoin logo

BitcoinBTC

$ 10645.84

2.87%in last 7d
Ethereum logo

EthereumETH

$ 347.18

9.92%in last 7d

Conversations (8)

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socialtrends

20 days ago

Nice summary of one of the most important metrics. Good work!

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anonymous

20 days ago

The comment has been deleted.

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<email hidden>

20 days ago

Good summary!! Very clear! 100!!

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Tom

19 days ago

Hello Vlad, thank you for this analysis, on the other hand I notice that this is not necessarily the case, if we look at the ETH between December 2019 and March 2020, the price increases until January, the DAA and the network growth decreases, but the price continues to rise very high. would you have an explanation?

Hello Tom, Could you please take a screenshot of the graph and highlight the areas which you are talking about on the model, so I can take a look? Thanks

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Tom

Edited 18 days ago

sure here is the screen: https://i.imgur.com/bljWRXZ.png (the red arrow) the network growth and the DAA are both low, but the price is increasing drastically, maybe it's due to a geopolitical change in favor of buying, or maybe I'm just wrong, and this increase is completely normal! I don't know. I'd love to hear your opinion.

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Vlad Antonov

Author
Edited 18 days ago

Basically, the chart itself doesn't tell you when one or another event will occur, but it tells you about the "fundamental value" of the asset, based on its actual usage. For example, if the price keeps going high but its DAA remains the same, then you know that the asset is overpriced. The opposite is also valid - if the price is low, but its DAA is growing it means that the asset is undervalued. Unfortunately, I haven't found any particular method that would allow accurately predict the timing of one or another event, so even if the asset is overvalued the price still can keep growing for a while. But price and fundamentals always converge together sooner or later, and so far, it doesn't take longer than one month. The bigger is the difference between DAA and Price, the bigger is the surge or fall of the asset.

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Tom

Edited 18 days ago

Sure, this is not an exact science, thank you for your answer.