Bold Predictions Volume VI - So... Was That the Dip?

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brianq
May 27, 2020

SANBASE SIGNALS

May 26, 2020


Summer is around the corner, and in our sixth edition of Bold Predictions, we're taking a look at the health of Bitcoin's and Ethereum's respective networks as usual, as well as the status of some widely discussed altcoins over the past week to decide whether their impressive surges can continue into next week, or whether it's time to profit take and prepare for a downswing. Almost a year ago, we kicked off the 2019 summer bull run that rapidly saw the price jump from $7,700 to just over $13,000 in just three weeks. Late spring and early summer has proven to be a more profitable than average time of year. To see whether 2020's May and June can perform similarly to 2019's, we have to take a deep dive into what the metrics are telling us!


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With every weekly volume we release of our Bold Predictions series, we are taking a look at the most recent three-day averages (or percent changes) for each metric we're covering. As a reminder, these signals are for intra-day traders to assess local tops and bottoms based on historically solid leading indicators.

Our rating system is simplified for this week. A 0 to 10 scale, with 0 being as bearish as possible and 10 being as bullish as possible. This would mean that a 5 would be neutral and imply sideways movement estimates over the next week. Whether we call a project bullish or bearish for the next week or two, please remember that this has no relevance to what we think of the asset's long-term viability as an investment.



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This Week’s Assets:

  • BTC, ETH, ENJ, OMG

This Week’s Metric Breakdowns:

  • Price/Volume Momentum, DAA vs. Price Divergence, NVT, MVRV Long/Short Diff, Top Holders Behavior


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Bitcoin ($BTC) - #1 Ranked Market Cap

Price/Volume Momentum

  • 3-Day Movement: -14.2%
  • 30-Day Movement: +14.9%
  • 90-Day Movement: +0.5%

Last week, we reported that Bitcoin's trading volume was declining while the price remained fairly close to the recent range of $9,000 to $10,000. Now we have dropped below, and volume has not stopped sliding. This is a bit worrisome, as bounces typically don't come to fruition unless there is some maintained or rising volume accompanying it. We definitely would advise caution here.


Rating: 2.5



Daily Active Addresses vs. Price Divergence

Bitcoin is continuing to show its three-week slightly bearish divergence trend, and the price has started to dip accordingly. Although the divergence has been mild (and can obviously change very easily when not a significant one), the longevity of this bearish streak can play a factor. It is good that the bearish divergence is descending slightly as the price has dropped to the high $8,000's, as it means that daily active addresses are being maintained around the same levels... price simply had to catch up with the slightly lower than expected DAA.



Rating: 3.0



NVT

Short-term, Bitcoin's token circulation has been low... therefore its NVT hasn't looked so great. But has been two different tales in the month of May for crypto's #1 market cap coin. And overall, in spite of all of those hash marks you see above the trend line this month (representing a lower than usual amount of BTC token circulation), the entirety of the month is still semi-bullish. If things keep up the way it has over the past week, we'll likely see a neutral signal heading into June.



Rating: 6.0



MVRV Long/Short Differential

Well, after a rapid descent, it looks like Bitcoin's sentiment volume consumed on Twitter has dropped into negative range for the first time since April 13th. Typically, when sentiment dips into the majority negative territory, some of the best buy opportunities occur while many capitulate. Just keep in mind that we will likely need to see a bit more negativity before things get really juicy on this particular indicator.



Rating: 5.5



BTC Average Rating: 4.3 (Neutral/Slightly Bearish)



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Ethereum ($ETH) - #2 Ranked Market Cap

Price/Volume Momentum

  • 3-Day Movement: -3.2%
  • 30-Day Movement: +2.4%
  • 90-Day Movement: -10.5%

Just like Bitcoin, Ethereum's trading volume has fallen quite severely. In fact, in the case of ETH, the drop has been even more noticeable. The latest volume bars have actually fallen below the lowest prior low since Black Thursday. This is quite concerning as the uptrend for ETH seems to be coming to a halt.



Rating: 1.5



Daily Active Addresses vs. Price Divergence

Ethereum's DAA vs. Price Divergence model is showing that the price is about right on par with where it should be, according to the amount of unique transactions being made on a daily basis. Over the past month, this divergence has been mostly bearish, but none have exceeded the key 0.5 threshold to indicate an extreme deficit in transacting addresses.



Rating: 5.0



NVT

Token circulation has been disappointing the past week or so, but we're seeing a pretty bullish divergence here considering we're at the same price level we were at in April's close, yet we've seen an increase in the already bullish amount of unique tokens being transacted on the ETH network this month. Things will likely get closer to the trend lines as the month closes, but if they don't, ETH may close nearer to neutral than bullish on this model. For now, we still love this mid-term setup from an NVT perspective.



Rating: 8.0



Sentiment Volume Consumed

Unlike BTC, Ethereum's mentions on Twitter have actually continued to stay positive. Albeit, the ratio of positivity has been declining. This higher level of optimism toward ETH can be looked at two different ways - 1) There are more people who have overextended and are primed to lose of Ethereum falls back under the psychological level of $200. 2) People are higher on ETH than BTC, so if Bitcoin can regain its composure, the #2 market cap coin will be in a good spot for a higher percentage gaining summer than BTC. We tend to look at the momentum of sentiment volume consumed while it's in the positives, though, so the fact that it's pointing down gives us a bit more of a likeliness that we are heading back toward neutral instead of pushing higher.



Rating: 3.5



ETH Average Rating: 4.5 (Neutral)



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Enjin Coin (ENJ) - #44 Ranked Market Cap

Price/Volume Momentum

  • 3-Day Movement: +3.8%
  • 30-Day Movement: +30.7%
  • 90-Day Movement: +89.5%

Enjin Coin has been on one serious run, and with it returning about 1% per day since late February, people are anxiously wondering when the FOMO will end. And although ENJ's trading volume hasn't been falling, it has been following a pretty familiar volatile, yet lateral movement for the past month. There have been lower highs on the last three major volume spikes, and the last two have both indicated temporary local tops. For this reason, we think this latest surge over the past day will be corrected as the week progresses.



Rating: 2.5



Daily Active Addresses vs. Price Divergence

ENJ's DAA divergence has ranged between moderately and extremely bearish over the past 10 days or so. And this is because DAA started to flatten out, while the price just continued to soar higher. Normally, this is a clear sign that the price will be retracing. However, Enjin has been on a tear in spite of the odds, and the DAA has actually just moved positive for the first time since May 14th. It's difficult to say whether this is a sign of further movement toward the bullish end, but we have to find it unlikely.



Rating: 5.5



NVT

ENJ's NVT has been good, but not great. And its overall month of May is about to seal out its fourth straight bullish divergent month. If the past week was staying on pace, we'd be elated about how its token circulation is keeping up with its price. Instead, we're just mildly impressed, and it's a bit scary to trust a bullish divergence when the price has already skyrocketed as much as it has been in the past couple of months.

Rating: 9.5



Sentiment Volume Consumed

Enjin's Sentiment Volume Consumed reflects a Twitter crowd in disbelief of the continued surge that Enjin is experiencing. After finally going negative last week, the price essentially flattened out for a brief moment in time before resuming its trajectory north. It can be awfully difficult to go against the crowd at such an enormous high point for the coin, so even with it being negative at the moment, we will currently say that they are justified in being a bit bearish after four weeks of an unprecedented cross above 3 std.



Rating: 4.0


ENJ Average Rating: 5.4 (Neutral)

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OmiseGo (OMG) - #38 Ranked Market Cap

Price/Volume Momentum

  • 3-Day Movement: -13.0%
  • 30-Day Movement: +146.9%
  • 90-Day Movement: -89.9%

The Coinbase Effect gave the new generation of crypto traders a nice lesson that major exchange listings virtually ALWAYS result in an unprecedented price run-up, and many greedy traders were handsomely rewarded for jumping on the surging price train over the past couple of weeks. And although trading volume inevitably dropped once OMG nearly touched $2.00, it hasn't quite normalized yet. The price bounce has occurred the past few days, but it wasn't accompanied by the resurgence in trading volume that mid-May's OmiseGo investors welcomed.



Rating: 3.5



Daily Active Addresses vs. Price Divergence

On the rolling 21-day trading average, OMG has surprisingly developed quite a bullish divergence. This can be a bit deceptive, as most of the metrics are inflated right now due to all of the FOMO related to the 38th ranked coin being listed on Coinbase Pro. Bu with this dip, this major bullish divergence can't be ignored. Four straight days over a +0.5 threshold means there is still a serious running average of major DAA that price hasn't caught up to yet.



Rating: 7.0



NVT

The amount of unique tokens being circulated on OmiseGo's network right now is outstanding. Even nearly a week after it was made official, the project is having the healthiest rate of token circulation NVT in its existence. This is an easy perfect score for the time being.



Rating: 10.0



Sentiment Volume Consumed

As expected when an asset moves up 147% in the past 30 days, there have been some seriously polarizing swings in sentiment since Coinbase Pro announced its plans to list OmiseGo on their exchange (which was made official last Wednesday). Right now, it still like the FOMO is keeping it afloat, but we sill trust that things have settled close to its true value when this metric levels out to the 0 threshold again. This likely won't happen until there's a retracement. But there's no guarantee that this will happen in the next week or next month. For now, we'll simply base this metric's rating on what appears most likely. Greed looks to be primarily what is keeping the sentiment so high on OMG currently.


Rating: 2.5


OMG Average Rating: 5.8 (Neutral/Semi-Bullish)



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The large caps are laying low right now, and looking just a hair bearish. Meanwhile, many small caps are soaring. This is not typically how markets move, and even though ENJ and OMG are extreme cases of pumping coins that have been making headlines, there are many other projects outside the top 25 that are running wild and decoupling from BTC. If Bitcoin has a drop toward $8,000 in the next week or two, which it very well could, many of these coins that have selectively been ignoring what the king cryptocurrency is doing, will get hurt swiftly and take a long time to recover.


If you are playing the fun altcoin lottery right now and letting things ride on this exceptionally high return days and weeks, we advise you to proceed with caution. It doesn't take long to get caught in a FOMO trap, and you'll want to watch some of these leading indicators closely as the month of May comes to an end to identify when local tops are becoming prominent.

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BTCETHENJOMG
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brianq
May 27, 2020

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Assets from this insight

Bitcoin logo

BitcoinBTC

$ 11593.41

4.13%in last 7d
Ethereum logo

EthereumETH

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Enjin Coin logo

Enjin CoinENJ

$ 0.233060

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OMG Network logo

OMG NetworkOMG

$ 1.60

1.61%in last 7d