Overlooked Assets With Underwater Traders
We've discussed many strategies at Santiment that involve looking in corners of crypto that others have abandoned. Pumps typically come out of nowhere with assets that you probably haven't thought about for quite some time.
Take Bitcoin Cash (BCH) as an example. Over the past 9 days alone, its price has exploded +130%. Now obviously, this pump has a reason, as it was the biggest beneficiary among the 4 assets (BTC, ETH, LTC, BCH) listed on EDX last week.
For anyone familiar with the concept of "buy low, sell high", it's likely stating the obvious that buying BCH after the run it has been on is statistically more risky than, for a random example, buying Ethereum Name Service (ENS) after it has dropped 20% in the past month. But often, it's not as simple as just purchasing assets that have dropped a large amount in a short amount of time, and praying for a pump.
Santiment's MVRV model, for example, looks at 100+ assets and indicates the average trading returns across multiple periods of time. This way, you don't have to select an arbitrary time period and hope it's the correct one to make your portfolio selections. Additionally, MVRV doesn't measure the raw percentage returns of an asset. It actually looks at the percentage returns according to the active traders for a given asset.
So essentially, we can use this model to quickly identify some of the worst performers from short, medium, and long term timeframes over the past year, and find the projects that are in the designated "opportunity zone".
According to the model's latest screenshot we have shared above, it appears Dodo (DODO), League of Kingdoms (LOKA), and Reef (REEF) are among the assets where traders are suffering the most, when combining 1-day, 7-day, 30-day, 90-day, 180-day, and 365-day timeframes.
To simplify, let's take a look at each asset on Sanbase and select just 30-day (short/mid term) and 365-day (long term) timeframes:
At the time of this writing, Dodo's 30-day MVRV sits at -18%. MVRV's of -20% or below are usually good signals of an impending (or at least eventually impending) bounce. Meanwhile, its 365-day MVRV is at -35%, which historically is in range of an asset that is showing a buy opportunity.
League of Kingdoms (LOKA)
It looks like there are indeed some heavy losses for LOKA. Its 30-day MVRV has actually bounced recently, and -9% is probably not as juicy as some other assets just yet. But the -50% 365-day MVRV indicates that long-term traders have been absolutely beaten down by the poor performance of LOKA over the past year.
Reef's 30-day MVRV is, in fact, in the opportunity zone at the time of this writing, currently at -23%. And its 365-day MVRV looks equally intriguing at -38%. With plenty of pain being felt from the traders and hodlers of the #421 market cap asset, it could be worth looking into.
As a reminder, MVRV should be looked at on a gradual, scale basis. Not as a binary metric, where 30-day MVRV's go below 20% and it becomes an automatic buy candidate. View the lower it goes as a gradual better and better mathematical opportunity. But they can always go lower, and anomalies do happen!
And also, keep in mind that regardless of prices fluctuating, you do still need to be careful when making your trades solely on math. Assets rise and fall for fundamental reasons, such as hacks, rug pulls, new listings, etc. Always make sure you're still doing your research and know about the viability of these projects you're putting your hard earned money into.
Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
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