Bold Predictions XVIII: Blood in the Streets = Buy Time?

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brianq
Sep 9, 2020

SANBASE SIGNALS

September 8, 2020


As we have been preaching caution on for over a month or so, at least according to the models normally touched upon in these (now biweekly) Bold Predictions series, the markets finally retraced in a big way after an epic rally that began just days after the Black Thursday historical drop. Altcoin traders, in particular, did not enjoy the beginning of September. The top 100 assets returned an average of -21% over the past seven days, with Bitcoin retracing a much more modest -11%.


So what exactly was the cause of the major drop that has seen Bitcoin drop fight with staying above $10,000 over the past couple weeks after just a few days ago, being on the cusp of breaking $12,000 again? In short, it looks more and more like address activity, token circulation, and MVRV have been some of the most surefire signs of indicating when markets are getting too overheated. Or in this case, when all of the attention starts moving over to altcoins, while Bitcoin gets ignored as the "boring" king of crypto. We'll explore BTC, ETH, and other altcoins with some of the best leading indicator models available to our Sanbase PRO users to help guide you through what we expect to happen in the coming couple of weeks.


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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, LTC, REN

This Week’s Metric Breakdowns:

  • DAA vs. Price Divergence (2-Year Deviation From Mean), MVRV (30-Day), NVT, 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)

Bitcoin was one of many assets that had been looking quite a bit overinflated compared to the address activity it was seeing on its network. Our DAA vs. Price Divergence Model had over one month straight of under average daily output of addresses transacting on BTC's network, compared to what the expected mean should look like at the price levels it was reaching. As of now, with the dip back down to $10,100 at the time of this writing, Bitcoin is back to showing a very mild amount of bullish divergence as active addresses are much more appropriately outputting in accordance with where market values currently sit.


Rating: 6.0



MVRV (30-Day)

With Bitcoin's push down to below $10,000, and now just slightly above, many traders had the rug pulled out of them. Those who invested 30 days ago are now in the red at an average return of ~-10%. Historically, anything below 0% has presented a good opportunity for a bounce. This metric typically works best in tandem with some others, but in isolation, a buy while other traders are bleeding and experiencing FUD can be some of the most opportune times to take advantage of.


Rating: 8.0



NVT (Token Circulation)

For the first time since May, we are seeing a mild bullish divergence on the NVT model we have made for our PRO users. It may surprise many to see that token circulation was lacking even when we were rising from the low $9,000's level all the way to above $12,000. But this more or less validates what the DAA Divergence model was indicating, and that is the fact that prices likely should not have ever gotten as high as they did. And now that they are big in the $10.0k to $10.5k range, this NVT model has neutralized and finally began providing a buy signal again. Just keep in mind that September's semi-bullish signal is only based on 8 days in the month thus far.


Rating: 7.0



Weighted Social Sentiment

Bitcoin's social sentiment had actually already been veering negative leading up to this pullback, meaning Twitter's BTC traders were actually fairly spot on with their sentiment that the #1 crypto asset by market cap was becoming a bit too over-inflated. Now that the price has fallen, though, the sentiment has just become even more negative. And there is reason to believe that as this chart inches close to -1 below its mean sentiment, a bottom is near.


Rating: 8.5



BTC Average Rating: 7.4 (Bullish/Slightly Bullish)


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Ethereum ($ETH) - #2 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)

Ethereum's DAA vs. Price Divergence model has been one that we've been screaming caution on for quite some time. As its price ballooned to $485 at the end of last week, our model recorded the most bearish gaps between address activity and price in its 5-year history. And it ended up being spot on, as the price swiftly dipped with little resistance, all the way down to where the price now sits at $338. With this drop, the model actually still indicates we could have a bit more downside, and it's not out of the red just yet.


Rating: 3.5



MVRV (30-Day)

The average 30-day ETH trader took a pretty big beating over the past week, as one might expect. With this drop below $340, those who bought a month ago are now -14% on average. This has a lot to do with the major downturn in sentiment, as we'll cover a few sections below. Generally though, this giant drop is a good sign for those looking for a less risky buy opportunity for Ethereum.


Rating: 8.0



NVT (Token Circulation)

This one's actually quite shocking. For the 5th straight month (thus far in September), our NVT model is showing that token circulation is well above its expected levels based on market cap. These days, our Friday This Week in Crypto calls put a bit more credence in address activity than overall token circulation, but looking at this model's history for Ethereum, it's clear that there is still quite a bit of accurate price prediction coming from the extreme green vs. red signals here. And we are VERY bullish, according to NVT.


Rating: 9.0



Weighted Social Sentiment

Social sentiment has plummeted into negative territory for Ethereum, which is to be expected when you see an asset drop from $485 to $338 in less than a week. The -30.3% price drop has caused many to question what has, at least for the past three years, been considered one of the safest surefire assets next to Bitcoin. In our opinion, it still is, and the crowd getting overly skeptical of it is just more reason to jump in while people are unjustifiably panicking.


Rating: 8.0



ETH Average Rating: 7.2 (Slightly Bullish/Bullish)


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Litecoin ($LTC) - #10 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)

Litecoin, along with Ripple and Bitcoin Cash, has legions upon legions of traders that laugh at the sheer mention of the asset. It has remained virtually ignored in the mainstream crypto spaces for 2+ years now, but it does still have some legitimacy as a lightning network testnet coin for Bitcoin. It also is still a top 10 market cap coin (just barely). So seeing that it's beginning to climb in terms of address activity on our DAA vs. Price model is something to take note of. There is a bit less correlation in how its price fluctuates around bullish and bearish signals (see the non-factor in price movement in early to mid-June when its address activity exploded). But the sheer amount of green occurring for the past 6 months indicates that there will eventually be a pretty big pop for one of the least talked about top 25 market cap assets in 2020.


Rating: 7.5



MVRV (30-Day)

Average 30-day buyers of Litecoin are down -15%, and this is good news for the contingency of traders looking to get in while the crowd is again moving away from the project after some noticeable gains in late August. This is the lowest its 30-day MVRV has been since late March, so seeing traders in the red this much is a pretty good looking opportunity.


Rating: 8.0



NVT (Token Circulation)

Litecoin's token circulation has been showing signs of life since July. And the fact that September has output a 3rd straight month of at least a semi-bullish signal in spite of prices descending, is actually a great sign. We look for setups like these where our NVT model predicts upward price movement, but the asset just hasn't responded to it yet. Ultimately, it usually does when enough time elapses, so keep an eye to see when LTC finally responds to its increased token circulation it's been seeing seeing for the past 2.5 months.


Rating: 7.0



Weighted Social Sentiment

Litecoin's resting weighted social sentiment is already quite low these days. So the fact that it's just above average in spite of the price retrace really doesn't mean a whole lot. We do anticipate that it will drop back into the negatives of the market drop continues, but traditionally weighted social sentiment on Twitter does not have much predictive power for a seldom discussed asset like LTC.


Rating: 5.0



LTC Average Rating: 6.9 (Slightly Bullish)


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Ren ($REN) - #41 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)

Ren's major neon green bullish divergences have not been flukes on this model, and its one major sell signal ended up coinciding almost perfectly, just one day after the local top of $0.578 on September 1st. Now that a retrace has occurred of more than -50% at a price of $0.274, the major bullish divergences on our DAA-Price Model has resumed. This is a rather nice setup to capitalize on as long as Bitcoin can stabilize a bit to let the top active altcoins begin their recovery process after this week's major dip.


Rating: 9.0



MVRV (30-Day)

When price retraces exceeding -50% happen, it's to be expected that 30-day average investors of an asset are going to bleed in a pretty big way. In the case of REN, the 30-day MVRV is a whopping -26%, one of the lowest among top 100 altcoins. This is a prime signal that a buy is justified here, as the only time it was lower was the days immediately following Black Thursday back in mid-March.


Rating: 9.5



NVT (Token Circulation)

Token circulation for Ren just continues to look outstanding, as unique tokens are being moved at a faster rate than the month prior for the fifth straight month (thus far). Though its price has come back to earth, there is no reason to believe that activity is going anywhere when looking at just how far below the NVT trendlines REN is looking. This is about as bullish as this model can ever look for an asset.


Rating: 10.0



Weighted Social Sentiment

Interestingly, in spite of the market correction, Twitter is still quite optimistic about the prospects of REN. And according to all of the models we've just gone over, there appears to be good reason. That being said, we don't want to see the crowd up near +1.0 above mean levels in sentiment, as prices tend to move inversely to crowd expectation. When sentiment got insanely bullish in the summer of 2019, a local top quickly formed. So we caution our community to proceed with caution, according to this indicator of crowd sentiment.


Rating: 2.0



REN Average Rating: 7.6 (Bullish)


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With such a large altcoin correction, the attention has focused back to Bitcoin and Ethereum, as is often the case when many obscure coins cycle back and the sense of invincibility for the altcoin markets begin to wear off. We're in a time now where the dip buying may seem overly obvious, and that is giving many traders pause. But according to some of our best leading indications, there is legitimate reason to be excited for a recovery for all four of the assets mentioned in this article, sooner rather than later! This is of course not investment advice, and anything can happen in the markets to swiftly change the activity in the markets to cause further downside. But taken in a vaccuum, these metrics show that at least a short-term recovery is far more likely of an outcome than too much further of a drop.


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BTCETHLTCREN
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brianq
Sep 9, 2020

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Assets from this insight

Bitcoin logo

BitcoinBTC

$ 19263.35

13.09%in last 7d
Ethereum logo

EthereumETH

$ 601.61

28.56%in last 7d
Litecoin logo

LitecoinLTC

$ 89.37

23.44%in last 7d
Ren logo

RenREN

$ 0.360924

4.08%in last 7d