Cool down, you heated PEPE

In our previous post, we discussed the signs of FOMO or "heat" in the market, which contributed to the current downturn.

As a short reminder

1. Retail accumulation: Articles in crypto media have highlighted small holders accumulating BTC recently, suggesting it's a positive sign. However, as we've explained, this can actually be a dangerous indicator.

2. Spiked and diverging network activities: For example, take a look at the DAA24h for ETH between April 11th and 19th.

3. Influencers' sentiment: If the overly positive sentiment among influencers starts to fade, it might indicate a change in market conditions.

4. Funding rates: Although they weren't extremely positive, we've discovered an additional source of information to monitor.

5. Stable coin holdings: Keep an eye on the decrease in stable coin holdings, which could indicate a shift of funds into altcoins.

Now, let's focus on the possible future and the metrics we can observe to determine if the bottom has been reached or if there's still room for further decline. Remember, this is not investment advice but rather an analysis of key indicators.

To gauge the market temperature and determine if a recovery is on the horizon, we can observe the following metrics:

1. ETH mainnet fees: Lower fees can signal reduced market activity and cooling down.

2. Deposit transactions: We need to break a downward trend, which would indicate "I'm finally scared (or afraid), need to sell some ETHs".

3. Long/short positions composition: A lower ratio of long to short positions can signify a more balanced market sentiment.

4. PEPE metric: the rise of PEPE nation is the fall of the market. We need to switch their places.

A combination of these four indicators (ideally all of them) would make a strong case for a market recovery. However, until these conditions are met, the market remains vulnerable to sudden drops.