Spotting dips with a two metrics ratio
Assets covered: AAVE, COMP, MKR, REN
Metrics used: Active Deposits, Daily Active Addresses, Age Consumed
Charts layout: https://app.santiment.net/s/zc047Epk
A few weeks ago we've shown how to spot market reversal using divergences — part 1, part 2. However there is one more possible bottom indicator, a complex metric, Active Deposits to Daily Active Addresses ratio (AD/DAD). A balance between token holders activity and overall network activity. AD/DAD as a kind of a 'panic' level.
Let's have a look at the charts.
Looks like price likes to grow from this metric bottoms. We could suggest that low values of AD/DAD ratio are indicating a nice buy opportunities. Same time higher levels of AD/DAD indicate ‘exit’ points, where holders probably tend to exit their positions. The higher deposits (AD), the higher holders 'panic' level we suggest.
Compound's AD/DAD dipped to all time low just a few days ago. Good sign.
AD/DAD has dipped around the end of January. We could suggest it could surge more, not as strong as other tokens but still.
When we just start dumping, we'd like to see a high spike first, it could indicate a panic day. Like in REN:
Then we've got a perfect bottomish 'splash' around January 22. Active Addresses spike plus Age Consumed spike suggesting that holders have panicked and started to move their bags towards exit. In fact it's often a very nice entry on a dip when you see a similar pattern on charts.
Once again, one of the best risk/reward ratios is somewhere near AD/DAD bottoms. Real bottoms. Taking into account the context of course.
Charts used: https://app.santiment.net/s/zc047Epk
Not sure how to apply complex metrics? A short video explaining how two metrics ratio (Active Deposits to Daily Active Addresses) can be made: https://youtu.be/Pm8EzDvrneE
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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