Bold Predictions XVII: So Was This Just a Temporary Retrace, Or Should We Be Worried?

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brianq
Aug 26, 2020

SANBASE SIGNALS

August 25, 2020


As Bitcoin has corrected over the past week, altcoins have received quite the spotlight. Since the local top of $12.3k was hit last Monday (eight days ago from the time of this writing), there has been quite a battle between the bulls and bears. Many think that this retrace down to $11.3k is a temporary blip on the radar on our way back to the late 2017 glory days of $15k and beyond. However, as we'll see in this article, there is a growing contingency of traders who believe that this correction has a lot further down to go after such a strong push over the past five months since mid-March's Black Thursday event.


Daily active addresses have been a pretty fantastic historical indicator that has gotten Santiment quite a bit of publicity. And rightfully so. We can't cover every asset in these now bi-weekly editions of our Bold Predictions, but we can definitely tell our audience that active addresses are suffering, and particularly for alts. But if Bitcoin can stay in five figure prices, particularly above $11k, it doesn't necessarily mean the altcoin party is over. And by using the models and charts mentioned in this article, you may be able to identify ways to continue longing the right assets at the right time windows regardless of whether we have some flat or slightly bearish conditions under way.


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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, BAND, KNC

This Week’s Metric Breakdowns:

  • DAA vs. Price Divergence (2-Year Deviation From Mean), MVRV (30-Day), Transaction Volume Weighted Social Sentiment (Twitter)

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Bitcoin ($BTC) - #1 Ranked Market Cap

  • 7-Day Movement: -3.5%
  • 30-Day Movement: +3.3%
  • 90-Day Movement: +19.2%

DAA vs. Price Divergence (Long-Term Deviation)

Since July 27th (nearly a month ago from the time of this writing), there has been only a single day of a bullish signal on our popular DAA-Price Divergence Model. This is actually a pretty big deal, and it's indicative that daily active addresses simply haven't surged nearly as much as price has, particularly since it crossed $11,000 for the first time in a long while in late July. After this dip down to $11.3k, the bearish signal has retracted a little bit (as shown in the medium red colored signal on the far right, but there have been several indications that a continued retrace could be coming until price evens out with this lowered address activity that hasn't stayed in line with the roaring five-month crypto rally.


Rating: 2.5


MVRV (30-Day)

For the first time in over a month, the average 30-day buyers of Bitcoin are actually down in their investments. As Bitcoin rose to over $12k last week, the profit takers and FOMO'ers bought the top a tad too hard, and many quickly went into the red on the way back down. Historically, any MVRV metric under 1.00 is a better than average buy opportunity. In this case, it's a short-term opportunity, but at 0.98 now on a fairly rapid fall, there could be time to get in on a short-term rally back to the $11.5k - $11.8k range, but there are no guarantees prices will bounce back or stay there. The more FUD on this dip, though, the more likely another attempt back to $12k occurs.


Rating: 6.0


Transaction Volume

We can see that ever since the underwhelming #Halvening took place in early May, transaction volume more or less took a nosedive. As we've done several studies on, it appears that most of this was due to market favoritism toward altcoins, and particularly DeFi projects. As of late, Bitcoin has more or less been hovering at transaction volume levels well below even before the pre-pandemic crash. Suffice to say, this is concerning. And volume spikes seem to be most prominent on downturns over the past few days in particular. This implies that the market is reacting more strongly and attempting to add to the momentum of slides rather than rises.


Rating: 2.0


Weighted Social Sentiment

The last time the Twitter crowd was more negative than the standard mean for Bitcoin was in mid-late July when prices were still in the long-lasting $9k-$10k range and markets were becoming stagnant. But this past week, after the latest push above $12k and another immediate slip back down to the low $11k's, it appears the crowd is becoming non-believers (at least slightly so) in Bitcoin's ability to break this key resistance. Historically, when crowds are non-believers, the opposite comes to fruition more often than not. But we still have to keep in perspective that we aren't in extreme negative crowd territory with just a -0.6 deviation from the mean. Often times +1.0 or -1.0 are the levels that really start to indicate extreme one-directional beliefs.


Rating: 7.0


BTC Average Rating: 4.4 (Neutral/Slightly Bearish)

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Ethereum ($ETH) - #2 Ranked Market Cap

  • 7-Day Movement: -6.1%
  • 30-Day Movement: +18.7%
  • 90-Day Movement: +73.6%

DAA vs. Price Divergence (Long-Term Deviation)

Yep, you're seeing this sea of red correctly. Our Price-DAA model is indicating that Ethereum was not being justified at all at this $400 price level. In fact, we saw a 2-month low in daily active addresses back on August 12th, in spite of prices being up around 65% from just two and a half weeks prior. Ethereum nearly scraped $450 before making a quick drop back down to earth, and according to this model, earth still isn't even here yet. With daily active addresses being extremely underwhelming during this impressive rally, things tend to even out over time. The model is still predicting extremely bearish roads ahead, and it's going to take a serious sudden push in address activity in order for prices not to continue down to $350 and potentially lower to neutralize these red bars indicating price is well inflated currently.


Rating: 1.5


MVRV (30-Day)

The 30-day MVRV for Ethereum is more or less right where Bitcoin's is, with average traders buying a month ago down a very mild -2% in this timespan. This was a much steeper dropoff though, as a month ago, ETH holders were at sky-high levels of positivity with average traders a staggering +33% on the 30-day MVRV on July 31st. Even when an asset surges +60% or more, it's quite rare for MVRV's to go above +30% in just a month timespan, so this was bound to come down. Now that it is, this metric is signaling that there might be some short-term potential for a buy opportunity.


Rating: 6.0


Transaction Volume

Transaction volume for ETH is again following the same pattern as BTC, if not still a bit higher in August than it was in July after the massive run it displayed in early August. This is a concerning sign with trading activity being well below pre-pandemic levels. With interest levels waning, we'll have to keep a close eye on whether things can pick up and people are willing to dip buy if prices begin dropping to the $350 range or below.


Rating: 3.0


Weighted Social Sentiment

ETH positivity reached all-time high levels in the beginning of August as a two-year high price level was reached. For many, this was an indicator that we were going straight back to $1,000+ price levels like we saw in late 2017. Especially when it had decoupled from Bitcoin as it surged past $400 and away from the altcoin pack. Though four-figure Ethereum may and likely will eventually happen again, it clearly wasn't ready yet. Now, things have actually turned negative as so much of the crowd is yelling that the top has come in. -0.52 below standard deviation indicates a short-term buy opportunity could be presenting themselves as the masses on Twitter seem to be presuming it's sell time.


Rating: 6.5


ETH Average Rating: 4.3 (Neutral/Slightly Bearish)

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Band Protocol ($BAND) - #63 Ranked Market Cap

  • 7-Day Movement: -2.6%
  • 30-Day Movement: +255.9%
  • 90-Day Movement: +776.1%

DAA vs. Price Divergence (Long-Term Deviation)

Our DAA vs. Price Divergence model for BAND is still fairly limited due to it being such a new coin with limited history available. But based on the months that we have thus far, it's clear that daily active addresses have not supported the huge price ascension that the 63rd ranked asset enjoyed beginning at the turn of the month. Daily active addresses were actually notably higher on July 20th when the price was at $4.90, compared to the output we're seeing now when prices are still hovering around $11.90 at the time of this writing. This explains the concerning sea of red, which correctly predicted the August 12th top with its most bearish DAA divergence to date.


Rating: 1.0


MVRV (30-Day)

The 30-day MVRV for BAND was absolutely out of control throughout August, with multiple times, seeing the average 30-day trader nearly at 3x profit. But that changed in a hurry, and 30-day traders who bought in near the $17.30 top caused this metric to actually dip into the negative at -3% at this time. There could be a short bounce opportunity due to this metric plummeting so swiftly and causing so much panic selling.


Rating: 6.0


Transaction Volume

Band Protocol's transaction volume has actually been impressively high prior to its initial mid-July liftoff above $2.00 The massive volume when its price peaked two weeks ago still dwarfs the rest of the dates on this chart, but this can be considered an anomaly. Transaction volume has just started to rise again following a minor price bounce earlier today, and the mid-term trajectory still indicates that there is a significantly higher level of trading than there was just a month prior.


Rating: 7.5


Weighted Social Sentiment

If you thought the ETH euphoria shown in the previous segment for weighted social sentiment, BAND's manages to look even more wild. Nearly scraping +3 in the standard deviation above sentiment mean when prices jumped over $17, it nosedived in a hurry and is actually at -0.2 now. This is a pretty crazy drop-off in sentiment, and considering how far and fast the elation over this asset was on Twitter, there could be some opportunity to go against the crowd here.


Rating: 6.0


BAND Average Rating: 5.1 (Neutral)

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Kyber Network ($KNC) - #53 Ranked Market Cap

  • 7-Day Movement: -0.8%
  • 30-Day Movement: +15.3%
  • 90-Day Movement: +133.9%

DAA vs. Price Divergence (Long-Term Deviation)

Kyber Network's daily active addresses have quite frankly been way under what they should be at these price levels. And we didn't even need this model to see this as pretty clear as day. DAA peaked overall back on July 3rd, and they have more or less slipping since early July in spite of the price actually making an even higher high just 10 days ago. This is the opposite of what typically justifies this kind of price movement. Therefore, we're in a pretty clear spot to be weary of a continued price rise.


Rating: 1.0


MVRV (30-Day)

Kyber Network Coin has actually fallen out of popularity slightly in favor of the more trendy DeFi assets as of late, and part of the reason now is because the average 30-day traders are -9.5%. As we've learned with this metric, we buy when the average traders are beginning to lose money, and when this metric was below -10% in late July, a major price rebound took place. One probably shouldn't expect history to repeat itself like that major bounce heading into August though. We're giving it a mild bullish boost here.


Rating: 7.0


Transaction Volume

Volume, on the long-term scale for KNC, actually looks pretty decent here. It's on a slight decline ever since it hit its serious peak in early July. But overall, Kyber Network traders are still fairly active, and this is an encouraging sign that this asset still justifies a healthy amount of circulation for traders.


Rating: 5.5


Weighted Social Sentiment

KNC social sentiment is about break-even right now at just -0.12 below standard deviation. This is relatively insignificant, and the crowd appears to be fairly neutral currently after a modest bounce to new all-time highs in mid-August.


Rating: 5.0


KNC Average Rating: 5.3 (Neutral)

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In our last edition of Bold Predictions, we noted that euphoria was really beginning to take hold, and this indeed ended up coming to fruition with the vast majority of crypto assets retracing in a hurry shortly after that article was published. Now, we're in a bit of a state of flux where there are polarized opinions. Some think two weeks ago was pretty much the highest we'll see many assets for a long while. Others seem to believe this market-wide retracement was just a small detour to buy dips before the trains really take off. Our indicators appear to agree more with the former crowd currently, but we highly suggest that you take advantage of all the models we are reporting about now on a daily basis on Twitter and get a two-week trial of Sanbase PRO with us today!


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BTCETHBANDKNC
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brianq
Aug 26, 2020

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Assets from this insight

Bitcoin logo

BitcoinBTC

$ 10633.81

2.95%in last 7d
Ethereum logo

EthereumETH

$ 345.59

10.26%in last 7d
Band Protocol logo

Band ProtocolBAND

$ 6.77

3.53%in last 7d
Kyber Network logo

Kyber NetworkKNC

$ 0.936784

15.72%in last 7d

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