REN approaches ATH: What's driving the rally and how high can we go?

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Jun 17, 2020

Quick takeaways:

  • REN's on-chain and social data point to a surge in network activity ever since the mainnet launch, with several 'yellow flags' starting to appear for the coin's price action
  • Assets covered: REN
  • Metrics used: daily active addresses, holder distribution, mean dollar invested age, token age consumed, supply on exchanges, 30d and 60d mvrv, social volume, social sentiment, social data feed, top transfers

‘Tis the DeFi season, it seems.

After the likes of KNC, ZRX and AAVE all surged earlier in the month despite Bitcoin’s ongoing fatigue, the DeFi-related pumps resumed with the REN token which is currently up an impressive 35.8% in the past 7 days alone.

REN's price action, last 3 months (Source: Sanbase)

As corroborated by their token’s price action, the REN project had quite the eventful month, clocking in major milestones, releasing price-moving announcements and onboarding new users at a rapid pace.

If you’ve missed it all, don’t worry - here’s what’s been happening with the REN project in the past few weeks and what the coin’s on-chain, social and financial data suggest might happen next:

What is REN?

Back in its ICO days, Ren was originally pitched as a better way to facilitate crypto’s dark pools, however the project’s focus eventually pivoted towards blockchain interoperability, or the ongoing problem of how best to share value and information across different blockchain networks. To that end, REN now dubs itself ‘an open protocol that enables the permissionless and private transfer of value between any blockchain.’

And not a moment too soon - as DeFi solutions continue to grow, so does the demand for tokenized BTC on Ethereum in particular. The most popular solution at the moment, wBTC, comes with a number of documented downsides, like KYC requirements or the fact that the coins are minted from network partners and held in a custodial manner.

The Ren team - along with several other projects - aims to create a non-custodial solution to wrapped Bitcoin with their renBTC, implementing a robust incentive structure to keep the process decentralized.

Facilitating this process is the RenVM (Virtual Machine), which enables cross-chain lending, exchanges and collateralization. RenVM is powered by a network of decentralized machines known as Darknodes, which contribute their bandwidth, computational power and storage capacity, and in exchange earn a share of the volume transacted through RenVM.

This is where the network’s token - REN - comes into play; to run a so-called ‘darknode’, one needs to stake a minimum of 100,000 REN (~$11,000 at the time of writing).

As I mentioned, Ren had itself a very eventful 20 days, starting with the much-anticipated launch of their Mainnet on May 27th:

‘After years of work we are finally here. RenVM Mainnet is live!’ read the project announcement. ‘Anyone can now use real Bitcoin (BTC), Bitcoin Cash (BCH), and Zcash (ZEC) in your favorite DeFi application. This allows you to trade, lend, and leverage these assets as you would with any other ERC20.’

The launch of the RenVM Mainnet also meant that anyone could now run their own Darknode, by sending 100,000 REN to the Darknode registry address. So how’s the darknode adoption going?

Not bad at all! Since the mainnet launch, a total of 638 transfers of 100,000 REN made its way to the ‘Darknode registry’ address, with the lion’s share of the activity concentrated in the first 5 days since the launch:

Amount of token transfers to REN's Darknode registry address

For a more composite view, here’s the registry address run through our Historical Balance tool:

Historical balance of REN's Darknode registry address (Source: Sanbase)

As you can see, the Darknode registry currently holds 63,800,000 REN, or around $7,500,000 at the time of writing. The movement of REN funds to the Darknode registry can also clearly be seen on our Holder Distribution charts - specifically, the amount of addresses holding more than 100,000 REN went from 809 the day before the mainnet launch to 677 a week later:

Amount of addresses holding more than 100,000 REN, last 6 months (Source: Sandata)

This is further supported by the coinciding spike in REN’s daily active addresses, which on May 27th climbed to its second-highest day since the project’s ICO, with 503 addresses sending or receiving the REN token:

REN's daily active addresses, last 2 years (Source: Sanbase)

The Mainnet week also saw a conglomerate of spikes in REN’s token age consumed, indicating that a significant amount of previously idle REN tokens started changing addresses at the time, likely due to a number of long-term holders rushing to run their own darknodes:

REN's token age consumed, last 3 months (Source: Sanbase)

The size of this event can clearly be seen on our Mean Dollar Invested Age chart, which tracks the ‘average age’ of all coins on the network based on their initial acquisition cost. Rising MDIA slope indicates a period of HODLing or accumulation, while a declining slope often indicates an increased movement of dormant coins between addresses or even a distribution cycle. As expected, REN’s MDIA had a massive dip near the mainnet launch, further validating the idea that many longterm holders moved their coins after the announcement:

REN's Mean Dollar Invested Age, last year (Source: Sanbase)

This also seems to be in line with the amount of withdrawals from REN’s most active exchange - Binance - which experienced strong growth around the announcement, peaking at 129 daily withdrawals on May 27th:

Amount of REN withdrawals from Binance, last year (Source: Sandata)

It should be noted, however, that not all of the coins transacted at the time went to the Darknode registry. At roughly the same time, there was also a massive spike in the amount of REN located on known exchange wallets, which grew by 26,000,000 REN (~$2,500,000 at the time) between May 23rd and May 27th, as speculators likely expected a strong mainnet pump:

REN supply on exchanges, last 3 months (Source: Sanbase)

The mainnet announcement did help propel the coin above $0.1 for the first time in 9 months, though the ascent proved very short-lived as REN dipped back to the $0.09 range in a matter of hours.

One additional curiosity I came across while looking into REN’s mainnet launch: 6 days ahead of the announcement, one of Ren’s ICO wallets moved almost its entire remaining balance of 1290 ETH (~$258,000 at the time) - its first outgoing transfer since early January 2019:

ETH spent over time, REN's ICO wallet (Source: Sanbase)

Looking at the address’ full historical balance, it held a total of 31,300 ETH at its peak with most of the funds moved by January 2019:

Historical balance of REN's ICO wallet (Source: Sanbase)

The funds were transferred to this address, which sure looks like an OTC based on its other ERC-20 transactions, namely the massive USDT transfers that the address helps facilitate.

Of course, there’s nothing wrong with using your ICO funds to fund the project’s ongoing development. However ,the timing of the trade certainly feels peculiar, if for no other reason than that it might have alerted the observant analysts of a major upcoming announcement.

Indeed, just the next day after this transfer, Coindesk broke news that renBTC quietly went live, with 1.24 renBTC minted from the team’s ‘own internal testing’. The signs were definitely there if you knew where to look!

REN’s price action: where do we go from here?

Overall, Ren’s mainnet launch was undoubtedly a seismic event for the network, the size and impact of which is clearly visible on virtually all of the REN token’s on-chain metrics.

However, REN’s price action was pretty disappointing in the days following the mainnet launch: the coin had hit a 9-month high $0,106 on May 28th and quickly retracted, dropping to as low as 0,084 before bouncing back.

This is hardly surprising given the amount of REN moved to exchanges around the time of the announcement, pointing to rapidly growing speculative activity and an increased sell pressure into the announcement. Another clear example of ‘buy the rumor, sell the news’.

Still, the post-mainnet dump proved to be temporary, with REN breaking out once again over the past 7 days, even shortly breaching $0.12 earlier today for the first time since its July 2019 top. So what’s leading this second wave?

REN's price action, last 3 months (Source: Sanbase)

Well, as it turns out, the Ren team wasn’t done with price-moving news. On January 11th, the project already announced the first native RenVM integration with Curve Finance, a popular stablecoin lending aggregator. Then, just yesterday, Ren announced the release of WBTC.Cafe, ‘a basic dApp that provides one of the easiest ways for average users to acquire WBTC with real BTC.’

Breakdown of REN's newly-launched

The above two announcements paired with the post-mainnet ‘afterglow’ continue to propel the price of REN upwards, pushing it ever so closer to the coin’s previous ATH of $0.146. But is there fundamental support for a sustained rally?

Well, REN’s on-chain and social data have certainly started to flash some ‘yellow flags’ in the past 48 hours. Starting with its social data, the amount of REN-related mentions on crypto social media has begun to pick up steam once again, ever since the CurveFi integration announcement:

Amount of 'REN' mentions on crypto social media, last 3 months (Source: Sanbase)

These elevated levels of social chatter - especially during a price rally, can often be indicative of ‘peak hype’ and point to increased risk of an upcoming correction. Zooming out, you can see that most of REN’s tops in the previous 365 days coincided with similar spikes in its social volume:

Amount of 'REN' mentions on crypto social media, last year (Source: Sanbase)

It’s not just the amount of mentions either - according to our crowd sentiment algorithm, the actual mood of the crowd has grown increasingly bullish in the past 10 days, which might sound like a good thing but it’s anything but. For many coins, extremely positive sentiment often precedes a short-term price correction, as all the ‘moonboys’ come out of the woodwork and the whales begin to dump on the jubilant crowd.

Case in point - the last time REN-related sentiment on social media has been this bullish according to our algorithm was back in July 2019, right before its interim top:

REN-related sentiment on crypto Twitter, last year (Source: Graphs by Santiment)

To confirm this, I’ve browsed through some of the messages mentioning REN that our system has collected in the past 24 hours (available in Sandata). I’ve filtered them in two columns - those bullish about REN and those bearish about REN. You’ll notice one of these is not like the other:

So...yeah. The crowd feels extremely bullish on REN at the moment, which could lead to a short-term correction for the coin like it did back in 2019. At least we have yet to see REN make it on our list of Emerging Trends, indicating that it’s one of the most discussed topics on crypto social media at the moment. This has often been a clear-cut signal of an incoming correction, as we’ve recently proven with a study that we performed on 200 coins.

As for REN’s on-chain data, the general network activity remains fairly high, with REN’s daily active addresses still hovering at around 400:

REN's daily active addresses, last 3 months (Source: Sanbase)

A strong leading indicator of several of REN’s tops in 2019 was a growing divergence between the coin’s price (pushing upward) and its daily addresses (declining rapidly). We see this happen quite often - the coin’s network activity retreats to its pre-pump levels, making the coin lose fundamental support for a sustained rally. Should we see a similar downtrend in REN’s daily active addresses in the next few days, it could indicate we’re finally approaching the top.

REN's daily active addresses, last year (Source: Sanbase)

Finally, another concerning sign in REN’s on-chain data are its relatively high 30-day and 60-day MVRV ratio, which calculates the average profit or loss of REN’s short-term holders. At the time of writing, REN’s 30-day MVRV sits at 1.24, indicating that those who acquired REN in the past 30 days are currently up 24% on their initial investment. Similarly, REN’s 60-day MVRV presently sits at a slightly higher 1.29.

REN's 30-day MVRV ratio, last year (Source: Sanbase)

These levels approach a ‘danger zone’ for the short-term price of REN, or points at which short-term holders have historically tended to close their positions and begin to take profits. For example, here’s the 30-day MVRV recorded at various REN tops over the past year:

REN's 30-day MVRV ratio, last year (Source: Sanbase)

You’ll also notice that MVRV extremes seem to flatten out over time. This is to be expected - as both the project and the crypto market in general continues to mature, we’re likely to see the ‘peak’ levels at which short-term holders are content with taking profit continue to decrease.

And profits are starting to be taken, it seems. Based on our top transfers dashboard available in Sandata, the single largest REN transaction in the past 30 days happened just 15 hours ago - a transfer of 10,000,000 REN (~$1,176,442) to a known Binance wallet:

A snippet of top REN transfers in the past 30 days (Source: Sandata)

Overall, REN’s on-chain and social data are starting to flash some concerning signs, although they’re not screaming ‘top’ just yet. Social sentiment is extremely bullish, yet the actual amount of REN-related chatter remains relatively normal. REN’s MVRV ratio is entering dangerous territory, but the amount of network activity remains high and continues to provide possible support for an extended rally.

Keep an eye on these indicators in the next few days. Should we see REN’s network activity retreat back to pre-pump levels or the amount of REN-related chatter ramp up even more (which is almost inevitable if the rally continues and gets closer to ATH), the top might very well be within reach.

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Jun 17, 2020

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4 months ago

That's a lot of information, thanks!