Bold Predictions XX - Bow Down to the Bitcoin Dominance

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brianq
Oct 6, 2020

SANBASE SIGNALS

October 6, 2020


Bitcoin is doing its best right now to exhaust traders into exiting the markets, without outright dropping. However, many of our key leading metrics are implying that a short or mid-term drop may be the likely outcome before we see $11,000 and beyond again. And based on the sentiment-driven metrics across cryptocurrency's major assets, it does indeed appear that traders are getting bored and impatient with all of the waiting through the diminished volatility that has been prevalent since BTC dropped into the mid-$10,000 price range on September 3rd (just over a month ago).


This week's focus is on some of the top market cap ranked coins in the industry: Bitcoin, Ethereum, Ripple, and Binance Coin. These four assets are arguably the most influential assets in the cryptocurrency industry, in terms of their weight and magnitude on the ebbing and flowing of all altcoins. We will dive into whether their address activity, sentiment-driven metrics, and overall activity happening on exchanges are indicating an upcoming rise or demise.


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With every weekly volume we release of our Bold Predictions series, we are taking a look at the most recent previous days of our metrics to assess what divergences may be forming to imply future market movement. None of our assessments should be considered investment advice, and we encourage you to explore Santiment's metrics for yourself to formulate your own opinions based on your own trading strategies.


As a reminder, these signals are for short-term traders to assess local tops and bottoms based on historically predictive leading indicators. Our rating system is simplified on 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 couple weeks until the next edition. Whether we call a project bullish or bearish for the next week or two, please remember that this has no relevance as to what we think of the asset's long-term viability as an investment.

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This Week’s Assets:

  • BTC, ETH, XRP, BNB

This Week’s Metric Breakdowns:

  • DAA vs. Price Divergence (2-Year Deviation From Mean), Exchange Inflow/Outflow, Transaction Volume, Weighted Social Sentiment (Twitter)

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Bitcoin ($BTC) - #1 Ranked Market Cap

  • 7-Day Movement: -1.2%
  • 30-Day Movement: +4.3%
  • 90-Day Movement: +13.7%

DAA vs. Price Divergence (Long-Term Deviation)

Bitcoin's daily active addresses can be considered "choppy" at best, and outright bearish at worst. 18 of the past 25 days on our model indicate that the divergence between unique addresses interacting on the network, and BTC's current price, looks bearish. We're in the mid range of bearishness right now, and this can be considered a scary sign for bulls optimistically waiting to see 2020 all-time highs in the near future.


Rating: 2.5

MVRV (30-Day)

Bitcoin's 30-day MVRV is essentially break-even over the past 30 days, sitting at -0.5% for the average trader returns over this time span. Essentially, the mood surrounding Bitcoin from a trader perspective over the past month should be about as neutral as it gets for this midterm time frame.


Rating: 5.0


Exchange Inflow/Outflow

Two weeks ago, we saw some very large exchange inflows that coincided with a 6% sudden drop in Bitcoin's price. However, things have mostly been calm since as Bitcoin has continued to ebb and flow around the mid-$10k range. We look for spikes in exchange inflows in particular as confirmations that some sells may be imminent, and we have just witnessed a dip from $10.7k to $10.5k at the time of this writing, which didn't seem to coincide with any major inflow spikes. So we'll actually consider this slightly bullish, and a sign that BTC has a chance of quick recovery.


Rating: 7.0


Weighted Social Sentiment

Well, folks... Bitcoin is now sitting at an all-time low in terms of Twitter sentiment related to the #1 asset in crypto. As mentioned in the opening paragraphs of this article, the stagnancy of BTC and the crypto markets in general has really worn on people's psyche and perceptions of their crypto investments. Short-term traders, in particular, have seen many fake-outs and false price breakouts that have led to losing trades even though average market prices haven't moved much at all since dropping to this mid-$10k range five weeks ago. Considering we're at all-time negative levels, and knowing that prices essentially follow the path of least expectation, this should be considered extremely bullish.


Rating: 9.5



BTC Average Rating: 4.8 (Neutral)


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Ethereum ($ETH) - #2 Ranked Market Cap

  • 7-Day Movement: -2.9%
  • 30-Day Movement: -1.1%
  • 90-Day Movement: +41.6%

DAA vs. Price Divergence (Long-Term Deviation)

Ethereum's price is currently $342 at the time of this writing, and our DAA Divergence Model has predicted further downside (based on an active address deficit on the network) for two straight months now. Since this time, prices have fluctuated wildly, managing to briefly scrape $485 before plummeting rapidly to catch optimistic traders off guard. Now we're still seeing greater than average bearish signals, and unique daily active addresses have continued to remain low compared to where prices historically have predicted the DAA should be. And if Bitcoin looks choppy, Ethereum should be considered flat-out concerningly bearish with such a long stretch of consistently red signals firing off day after day.


Rating: 1.5

MVRV (30-Day)

Based on 30-day price returns for traders, there is a little more hope of a mid-term price turnaround for Ethereum from a sentimental perspective. Average traders are -5% under water during this timeframe, and it seems as though the "bottoming out" range for this metric in 2020 is around -15% to -18%. So there could be a little more room to slide, but anything in the negative range for this metric should be considered a bullish sign. So don't wait around for it to slide all the way down to this "bottoming" range, because it may never get there on the 30-day timeframe.


Rating: 6.5


Exchange Inflow/Outflow

Exchange outflows have actually been subtly climbing, while inflows are subtly shrinking. This is another sign for ETH's long-term potential, and when outflows are high, it's a sign that major holders are content with moving their funds to offline wallets and are confident with its future price movements.


Rating: 8.0


Weighted Social Sentiment

Unlike Bitcoin, it appears that there have been a contingency of people who believe the $340-$350 range is heavily supported after its 30% decline from $485 last month. As a result of this collective audience, we've just seen Ethereum sentiment on Twitter trickle into the positive range again for the first time since August. We would actually prefer to continue seeing negativity surrounding the #2 market cap asset, as these negative perceived stretches are generally the most optimal times for an upswing.


Rating: 4.5



ETH Average Rating: 5.1 (Neutral)


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Ripple ($XRP) - #3 Ranked Market Cap

  • 7-Day Movement: +3.6%
  • 30-Day Movement: +4.7%
  • 90-Day Movement: +23.4%

DAA vs. Price Divergence (Long-Term Deviation)

Ripple's daily active addresses have taken quite a nosedive since the end of August, and prices have not been kind to its mid and long-term holders. This past week has actually looked encouraging to the Ripple army with some minor +4% to +8% stretches of price surges ahead of Bitcoin. But according to our charts, these mini-bursts aren't really being supported by improving on-chain activity. And when unique addresses participating on the network aren't improving, it's tough to be excited based on this model's current output.


Rating: 3.0

MVRV (30-Day)

Ripple's price upswing over the past three days has actually rocketed average 30-day traders into positive return territory after a month straight of being in the red. This recent crossing into the green is often a surefire sign that the perception of the asset is turning positive. And it's no coincidence that XRP has been a mainstay on our Emerging Trends for the past 48 hours at the time of this writing. From a trading perspective, though, we advise caution when an asset is leading the way as an emerging trend following a short-term price jump.


Rating: 2.5


Exchange Inflow/Outflow

A notable exchange inflow spike was picked up by Santiment's data in the early hours today, which is the largest Ripple has seen in about three weeks. This is a bad sign, based on history that has consistently shown local price tops occurring shortly after (or in tandem) with these spikes.


Rating: 1.5


Weighted Social Sentiment

Twitter's sentiment on Ripple isn't quite as positive as we would expect based on the recent price action that has occurred over the past few days. But it is rising close to neutral territory. For that reason, this can more or less be treated as neutral for now.


Rating: 5.5



XRP Average Rating: 3.1 (Bearish)


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Binance Coin ($BNB) - #6 Ranked Market Cap

  • 7-Day Movement: -2.5%
  • 30-Day Movement: +21.3%
  • 90-Day Movement: +63.6%

DAA vs. Price Divergence (Long-Term Deviation)

Binance Coin actually experienced a pretty good second half of September, and decent start to the beginning of October after dropping off along with the rest of the markets about five weeks ago. With its price rise in late September in particular, however, this was not accompanied by an equivalent amount of daily active addresses. This led to some 6-month lows in DAA divergence. We encourage people to be very cautious with altcoins after witnessing three straight days of extremely bearish signals coming from this model.


Rating: 1.0

MVRV (30-Day)

Binance Coin traders over the past 30 days are down a very mild -1.4%, and there has essentially been a gradual decline in MVRV over the past four months straight that is likely dampering the mood of traders that were well in the green at the beginning of June and have watched many of their profits vanish. Due to the long-term slide of this metric, it can actually be treated a bit more positively than a usual -1.4% output would.


Rating: 6.0


Transaction Volume

Since exchange inflows/outflows aren't currently available for BNB, we're looking at transaction volume as a secondary way of understanding how the asset is being traded. Volume has been quite reliable for Binance Coin as a way to identify price direction shifts, and we're currently seeing a very mild spike forming as price is shifting downward. So we'll view this as just a slightly bullish sign.


Rating: 6.0


Weighted Social Sentiment

Sentiment for BNB on Twitter appears to be just a hair into the negative, but it's also seldom discussed compared to other large cap assets. We'll take this with a grain of salt, given the small sample size.


Rating: 5.5



BNB Average Rating: 4.6 (Neutral/Slightly Bearish)


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There are major influencers like Jimmy Song who believe that Bitcoin dominance will be above 75% by the end of the year. Currently sitting at 64.8%, this threshold certainly would be possible... but it would mean a whole lot of altcoin dumping (which would be unlikely to occur with DeFi and so many other ERC-20 related trends still very prevalent), or alternatively, Bitcoin could just take off on its own while leaving other assets in the dust.


Based on how our metrics look for four of our best leading indicators, sentiment-related capitulation already appears to be happening with all-time lows (in terms of negativity) toward BTC on different platforms. And markets typically crash when sentiment is at euphoric levels, so a Bitcoin surge without altcoins having some sort of success would be fairly unprecedented under these circumstances.


All of this being said, identifying which assets will thrive can be done simply by continuing to keep a close eye on on-chain and social data, and the insights that we are regularly making on our Insights page. If you haven't done so already, we also encourage you to join the Santiment Discord to tune in to what our metrics are indicating as far as turning points in the market, and divergences to take advantage of!


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brianq
Oct 6, 2020

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Assets from this insight

Bitcoin logo

BitcoinBTC

$ 13126.48

13.96%in last 7d
Ethereum logo

EthereumETH

$ 419.14

10.73%in last 7d
Ripple logo

RippleXRP

$ 0.261909

6.02%in last 7d
Binance Coin logo

Binance CoinBNB

$ 30.60

2.29%in last 7d