LRC eyes another ATH: Metrics to watch

Loopring is on a tear again following a 15% drop yesterday, currently sitting at $3.6 and eyeing a new all-time high at Mach speed.

There’s a bunch of possible catalysts for the rally. The GME + Loopring rumour has been a crowd favorite for weeks now, plus it doesn’t hurt that Vitalik highlighted the project in a recent writeup on social recovery wallets. There’s also been one quasi-bullish rumour circulating on Loopring’s reddit in the past few days, but more on that in a bit.

Either way, LRC is almost back to price discovery so now feels like a good time for a general health checkup based on the coin’s on-chain and social activity.

As seen below, the amount of unique addresses sending or receiving LRC has soared by 150% in the last 36 hours, pointing to increased interest in Loopring’s native token on-chain:

The amount of addresses interacting with LRC for the first time has also seen a meteoric rise, peaking at 1706 for the past 24 hours. That’s more first-time addresses over the last 24 hours than most ERC-20 coins do in a week:

While I might consider this a hopeful sign in a vacuum, context matters. For one, the past few days have also seen a strong uptick in LRC-related deposit addresses, which are used to funnel LRC to known exchange wallets:

The rise in daily deposits (especially on a growing PA) tends to signal an increase in profit taking by holders and short-term sell offs. That’s why it’s not a surprise to see LRC deposits exploded around its previous ATH as well as earlier this week, prior to yesterday’s correction.

In other words, it’s fair to assume that at least part of this latest increase in on-chain activity is new sell-side pressure rather than some type of organic, network-level growth.

Still, IF Loopring’s new and daily addresses are able to maintain this same upward momentum over the next, say, 5 to 7 days, that could give real, fundamental justification for the current rally.

What I fear will happen, though, is what happened a few weeks back. As LRC broke its all-time high the on-chain activity skyrocketed and then, 24 hours later, went right back down, suggesting the euphoria and speculative interest was already drying out and there was now a strong bearish divergence forming between LRC’s price (riding high) and its on-chain activity (plummeting).

If this is the case, it might be difficult for LRC to sustain a prolonged pump, at least without a short-term correction. For now, its network-level activity is still going strong, but I’d keep a watchful eye over the next 48 hours.

(note - all this said, even if LRC’s daily addresses reset to around 1500 where they’ve been meandering lately, that’s still very impressive and would put it in the top 20 most active ERC-20 tokens. Watch this space.)

Another chart I’d pay attention to is Loopring’s social volume/dominance, to gain a sense of the level of crowd interest and euphoria in the coin. We collect Loopring-related mentions from more than 1000 crypto social channels including Telegram, Reddit, Twitter and more, and you can see them plotted against LRC’s price below:

What’s pretty clear is that several of LRC’s local (and all-time) price tops in the past few months have coincided with an uptick in social chatter towards the project and coin. We see this on the regular and have even done backtests that suggest high social interest and sentiment can indicate ‘peak market euphoria’, meaning you’d be buying into a LOT of social media shilling and rocket/fire emojis next to LRC’s name.

On the whole, excessive crowd chatter may point to irrational confidence about LRC among retail traders, and that may be an obstacle to prolonged price discovery. Here’s another chart to support this theory; mentions of LRC and GME together on crypto social media have - in the past month - often peaked around local price tops, as the hype train starts going off the rails:

For the moment, LRC’s social metrics are not that high (relative to recent pumps), but I suspect this will start changing soon. Keep an eye on it!

Finally, I wanted to bring up a rumour circulating on LRC’s subreddit these days, about how Coinbase has basically run out of LRC and is being very slow with processing LRC-related transactions because of it. As a result, some are saying this is bound to cause a supply shock in days to come and propel LRC to new heights.

It seems like most posts are referencing the Coinbase 2 wallet which indeed has a relatively small amount of LRC, but there are a few things to mention here.

Number one - not all Coinbase wallets are labeled by Etherscan or elsewhere. Coinbase wallets are notoriously tricky to track (trust me, we know) and it’s wholly possible that Coinbase has additional cold and hot wallets not known to the community with a whole bunch of LRC stashed.

Number two - based on our data, there haven’t been any seismic shifts in the availability of LRC on exchanges, as it’s been circulating between 30%-32% of total supply for about two weeks now:

Overall, the chances of a ‘supply shock’ seem pretty low from where I’m sitting, or at least no greater than they were a month ago. For now, I’d focus on LRC’s network-level metrics, deposit activity and social chatter in the next few days. These three should give you a good sense of the state of the coin.