Reading divergences to prepare for reversals, part 1

Metrics used: Active Addresses, Age Consumed, MVRV

Charts layouts:, (extended)

DeFi assets have crashed.

But why? Is there an explanation for what made it occur? To see it through our metrics before a pullback like this happens?

Absolutely! This insight will help to highlight how the last price top was formed, and which metrics to focus on before the next pump or dump.

  1. We'll be using a set of DeFi tokens - YFI, SUSHI, AAVE and COMP. These are established projects that are not considered too young or old. They also have enough holders, they behave correspondingly, and have volume represented by both the novice trading crowd, and the ‘smart money’.

  1. 1. YFI

What do we see here:

  • A price top occurred on January 3rd after active addresses hit a top on December 18th
  • There was a bearish divergence between price and active addresses prior to this price drop. These lines moving in two different directions is often the big warning sign


  • A price top occurred on December 30th after active addresses topped on December 28th
  • There was a subtle bearish divergence between price and active addresses prior to this price drop.
  • We also saw a divergence between price and MVRV around the same dates


  • December 28th: the price kept pushing up, however AAVE’s network activity was beginning to decline. This was a clear bearish divergence


  • There was an even stronger divergence starting around December 13th. The result was the same: active addresses started to decline despite the rising price. Essentially, Compound experienced its own correction.

All charts on one page:

You might consider using the linked chart layouts to position yourself for the upcoming bounce. The markets, of course, never move in one straight line. You can also await our next published insight, where we’ll be looking at things from a different angle.

You can also use this MVRV chart, which shows how much people lost profits in general: This helps spot bottoms, and you’ll see us touch on it more in our next insight.

Divergence in some specific metrics always tends to foreshadow the next upcoming reversal. We have left some evidence for you here on this insight, but we leave it to you to make your own trading conclusions!

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.

Thanks for reading!

If you enjoyed this insight please leave a like, join discussion in the comments and share it with your friends!


Conversations (0)

No comments yet
Be the first to comment