ZRX hits ATH transaction volume: what comes next?

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Jun 25, 2020

In this brave new world of leveraged yield farming and dog-eat-dog $COMP mining, everyone’s looking at the next big DeFi token to pump.

In such a setting, it can hardly go unnoticed when ZRX just decides to do this out of the blue:

ZRX, on-chain transaction volume, all time (Source: Sanbase)

Yes - although you might have missed it, ZRX’s daily on-chain transaction volume (the aggregate amount of ZRX tokens across all transactions) went beyond ballistic on Sunday, recording a new all time high of 300,334,000 ZRX (~$104,000,000!) in 24 hours and making me pull out my best Leo Dicaprio impression:

For comparison, this was almost ⅛ of Ethereum’s on-chaon transaction volume (in USD) on the day. Chainlink, a perennial crowd favorite and another aggressively traded ERC-20 token, did just $11.6m in on-chain transaction volume in the same 24 hours.

In other words, the spike was MASSIVE. Still, despite breaking the transactional equivalent of a sound barrier, the actual price of ZRX proved highly uninspired since. In fact, despite a solid start to the week, the coin is currently down -5.28% for the day:

ZRX, price, last 3 months (Source: Sanbase)

All of which made me take a closer look at ZRX’s recent on-chain and social data and try to answer two questions:

  1. 1. What in the world was that spike in ZRX’s on-chain volume?
  2. 2. Based on its fundamentals, where can ZRX go from here?

So let’s get right into it, shall we?

1. 'The spike'

The above anomaly in ZRX’s on-chain transaction volume had also manifested on a number of other on-chain metrics for the coin. To start, the same date saw the largest-ever spike in ZRX’s age consumed, which tracks the activity of previously dormant coins:

ZRX, Token Age Consumed, all time (Source: Sanbase)

Spikes in Token Age Consumed can often signal changes in the behavior of certain long-term holders and investors, and point to increased volatility for the coin’s price. You’ll notice on the above chart that several previous spikes in ZRX’s age consumed coincided with local tops or forming price bottoms.

However, this particular spike is likely just a reflection of the spike in ZRX’s transaction volume spike. After all, age consumed = trx volume X the amount of time since each transacted coin last changed addresses. If the coin’s transaction volume is high, so will its age consumed be.

More notably, the spike in ZRX’s transaction volume coincided with a major dip in the amount of ZRX being held in known (centralized) exchange wallets:

ZRX, supply on exchanges, last 6 months (Source: Sanbase)

In effect, the supply of ZRX on exchanges effectively HALVED in the past 5 days, going from 100,850,000 to just 51,270,000 at the time of writing. (note: keep in mind that this metric currently doesn’t include Coinbase wallets, which might be partially included in the recent action).

From a purely speculative standpoint, this could be a pretty bullish sign for ZRX’s short-term price action. But more on that in my second point - we still need to figure out where all these coins went!

To do so, we turn to our Top Transactions dashboard, which tracks the biggest transfers of all ERC-20 coins in our database. Here’s a snippet of the largest ZRX transactions in the past 5 days:

A snippet of the top ZRX transactions in the past 5 days (Source: Sandata)

As you can see, the majority of the largest ZRX transactions in recent days included very large supply or borrow actions with the Compound smart contract. This fits entirely with Compound’s own liquidity analytics, which saw a massive increase in both the Total Supply and the Total Borrow of ZRX in the past 5 days:

Total ZRX supply on Compound
Total ZRX borrow on Compound

To my eyes, it looks like a few large ZRX whales decided to do some high-roller ‘yield farming’ while also earning those sweet $COMP tokens in the process (Compound borrowers also get $COMP).

In fact, you’ll notice that I’ve connected transactions #3 and #4 with a red line: this was actually the same address, first borrowing 20,000,000 ZRX from Compound…

...and then supplying that same amount to Compound a minute later:

I’ve come across a few addresses with similar activity, like this one which has been incessantly moving millions of ZRX to and from Compound in the past few days:

Step 1. Move funds from Compound to an interim address
Step 2. Return funds to Compound

All in all, the largest on-chain transaction volume in ZRX’s history seems to have been less about mainstream coin adoption and more about a number of large holders ‘yield hunting’ on Compound Finance. If you thought the DeFi craze was slowing down, think again.

This is further supported by the fact that the actual amount of active ZRX addresses remained (relatively) normal throughout the past week:

ZRX, daily active addresses, last 6 months (Source: Sanbase)

At the time of writing, there’s still some nice yield opportunities to be had for ZRX on the platform, likely due to a significant drop in available supply:

Despite ZRX’s recent transaction volume likely being a bit ‘spoofed’ by the same coins moving in and out of Compound, a rising demand for ZRX on top lending protocols - in the middle of a DeFi wave - is still pretty bullish. So what does the rest of ZRX fundamentals tell us about its short-term price potential?

2. Where can ZRX go?

Even disregarding that transaction volume spike, there’s still a lot of optimism to be found in ZRX’s recent on-chain and social data.

Starting with our social indicators, the amount of ZRX chatter on crypto-related social media channels has remained fairly consistent ever since the spike on May 8th, earmarking the coin’s latest top:

Amount of 'ZRX' mentions on crypto social media, last 6 months (Source: Sanbase)

Overall this tends to be a positive sign for ZRX’s price potential, indicating that the coin is currently not ‘overhyped’ by the community, which tends to correlate with short-term price corrections.

As you can see above, extreme social volumes - especially during a rally - have often coincided with local tops for ZRX, as the crowd reaches ‘peak hype’ and the whales commence their dumping ceremony. As long as we’re in ‘normal chatter’ territory, ZRX has a chance for a sustained push upward.

On top of this, our data suggests that ZRX-related sentiment on social media is currently bearish overall which, while maybe counterintuitive, is also a good sign! As you can see below, it is the extremely bullish sentiment toward ZRX that tends to correlate with the coin’s historical tops and major price corrections:

ZRX-related sentiment on 'crypto Twitter', last 2 year (Source: Sanbase Pro)

Turning to our on-chain indicators, ZRX has been flashing a number of hopeful signals in the past few days.

Like I mentioned in the first block, the coin’s available supply on exchanges has effectively halved in the past 5 days - in one of my recent posts, I pointed to a number of examples where a diminishing token supply on exchanges coincided with a strong rally for the coins.

My working theory for this behavior is simple: assuming unchanged demand, the coin’s available supply to trade diminishes (sometimes intentionally/artificially), driving the trading price up.

ZRX, supply on exchanges, last 6 months (Source: Sanbase)

And while the exchange wallets have been sucked dry, ZRX whales have been on an accumulation binge. Over the past 5 days alone, the top 100 non-exchange ZRX holders have added more than 13,000,000 (~$4,470,000) to their collective bags:

Combined balance of the top 100 non-exchange ZRX addresses, YTD (Source: Sandata)

While some ZRX whales have been moving their bags to Compound, it looks like the largest players are content to just sit on their coins and keep hoarding. After this most recent accumulation spike, the biggest 100 ZRX whales hold more than 68% of the coin’s total supply.

Finally, another optimistic sign for the price of ZRX are the relatively low 30-day and 60-day MVRV ratios, which track the average profit or loss of ZRX’s short-term holders.

At the time of writing, ZRX’s 30-day MVRV sits at 1.03, indicating that those who acquired ZRX in the past 30 days are - on average - currently up just 3% on their initial investment. Similarly, ZRX’s 60-day MVRV presently sits at a slightly higher 1.07.

These levels are still far removed from the MVRV ‘danger zone’ or the points at which short-term holders tend to close their ZRX positions and begin to take profits. For example, here are the 30-day MVRV levels at a number of different ZRX tops over the past year:

ZRX, 30-day MVRV ratio, last 9 months (Source: Sanbase)

As you can see, the price tends to correct when ZRX short-term holders hit anywhere between 18% and 31% profit. At current levels where ‘new money’ is barely above breakeven, sell pressure is usually pretty low, allowing the price to push further up.

Overall, ZRX is still looking fairly tempting from a purely data-driven perspective. Add to that the general market sentiment toward DeFi projects as well as the fact that the team has recently launched a beta of their ‘Matcha’ DEX, and I wouldn’t be too surprised to see ZRX attempt another leg up in the coming days.

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Jun 25, 2020

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