To buy now or wait for a bigger dip? This is the biggest dilemma in our current bear market situation. When I buy the dip, the dip dips even more 📉 and when I choose to wait for the dip to dip even more, the market pumps up 📈 and I am left being 😫.
With Bitcoin halving approaching and the recent approval of 9 Ethereum Futures ETFs, we seem to be pretty much set for a bull market run right now when news about positive market movement is being pumped out everywhere on social media, but....
Why is the market still either moving sideways or dipping? 🥹
The truth is that no one possesses a crystal ball to predict the market's volatility, but today I will share with you 2 Market Analysis Tools that are useful and 3 On-chain Indicators which may, but not guarantee, help you spot crypto market bottoms.
Market Analysis Tools
1. Nansen
Nansen.ai is a Singapore-based blockchain analytics platform that helps DeFi investors make better decisions. It combines on-chain data with a massive database containing millions of wallet labels. Nansen also uses Artificial Intelligence (AI) to analyse on-chain data and smart contract interactions to assess the risk of different protocols. 📊
Probably the best on-chain analytics platform.
It has many useful tools such as:
→Token God Mode- deep dive into any coin
Weekly DEX trades, latest DEX trades, top transactions, & more.
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Nansen also comes with useful quick-access dashboards such as Token God Mode 🪙, Smart Money 🤑, Wallet Profiler 💳, Hot Contracts 📑, and NFT Paradise 🎑
2. Dune Analytics
Dune Analytics is an intuitive and easy-to-use blockchain analytics platform and I simply love how this platform has a community-driven ecosystem which makes analysing on-chain data super accessible and easy. 😌
Dune Analytics also offers a variety of features that make it easy to share and collaborate on on-chain data analysis. For example, you can create public dashboards that anyone can view, or you can create private dashboards that are only shared with specific people or teams. 👯
Overall, the strength of Dune is the flexibility it offers. If you are a non-technical investor then Dune Analytics is definitely the one for you. ❤️
Now you must be wondering, Dann 😡, what indicators do I look at when using all these Market Analysis Tools? Let me bring you through some on-chain indicators that could shed some light on analysing on-chain data.
On-Chain Indicators
1. On-Balance Volume
The First On-chain Indicator, On-Balance Volume (OBV), is a cumulative indicator that measures buying and selling pressure meaning that it adds volume on up days and subtracts volume on down days. +-
OBV's theory is simple, if the price of a cryptocurrency closes higher than the previous close after a 24-hour cycle, then all of the day's volume is considered up-volume. If the price closes lower than the previous close, then all of the day's volume is considered down-volume. If the price closes the same as the previous close, then the OBV remains unchanged. 🧐
However, this theory heavily bangs on the fact that the volume will correlate with the price movement. 🥹
2. Market Value to Realised Value Ratio
The Second On-chain Indicator, Market Value to Realised (MVRV) Ratio, is a metric that can be used to assess the market profitability of a cryptocurrency. It is calculated by dividing the market capitalisation of the cryptocurrency by its realised capitalisation. ➗
The MVRV Ratio can be interpreted as follows:
MVRV Ratio > 1: The market capitalisation is greater than the realised capitalisation, which means that the average investor is currently in profit. 🎉
MVRV Ratio = 1: The market capitalisation is equal to the realised capitalisation, which means that the average investor is neither in profit nor in loss. 😐
MVRV Ratio < 1: The market capitalisation is less than the realised capitalisation, which means that the average investor is currently in loss. 😭
A high MVRV Ratio can indicate that the market is overheated and that a correction may be imminent. Conversely, a low MVRV Ratio can indicate that the market is undervalued and that a rebound may be on the horizon. 😆
3. All Exchange Inflow
The Third On-chain Indicator, All Exchange Inflow, is a metric that measures the total amount of cryptocurrency that is being deposited into all centralised exchanges. 🌊
If exchange inflows are high, it suggests that investors are selling their crypto, either to take profits or to convert it to fiat currency. This can put downward pressure on prices. 📉
On the other hand, if exchange inflows are low, it suggests that investors are holding on to their crypto, either because they are bullish on the long-term prospects of the asset class or because they are waiting for a better price to sell. This can put upward pressure on prices. 📈
However, despite All Exchange Inflow being an important indicator to watch, it is evident that this indicator can be affected by a variety of factors, such as news events, regulatory changes, and whale activity. 🐳
by @joao_wedson
Link
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Wrapping Up
While timing the bottom sounds like a straightforward and simple concept, most of us WILL not get it right. Instead, countless crypto-fanatics are predicting market bottoms based on Historical Volatility, which is not a substantially proven theory yet and it brings a very vague question as to WHEN EXACTLY is the market bottom? 🤔
After reading this article I hope you gained some insights and let me know your answer to the dilemma...
To buy or not to buy? 🤔💭
