Algorand: Exploring the silver lining in the 30% crash in ALGO price

KEY TAKEAWAYS:

• Algorand price had remained stagnant ever since June 2022 until it had finally managed to stage a breakout early in November but quickly fell amid the FTX collapse led crash.
• Overall technical structure remains bearish as of now but that could quickly change as the broader market begins to recover.

Algorand, a crypto token that was once a favourite of investors and traders across the world has not been performing as well of late. Ever since the month of June 2022 – the coin has remained stuck within a very narrow range and only managed to provide a breakout in the early days of November before quickly come crashing down post amid the FTX crypto exchange collapse fiasco.

Explained in Detail: What caused the FTX Collapse?

In latest news from the Algorand Foundation – Min Wei has recently been appointed as the Global Head of Ecosystem Growth. This is a major positive development from the project since Wei comes with a wealth of experience in the world of Web3 and blockchain and previously, she had been the head of partnerships at Blockchain.com and is a graduate of Massachusetts Institute of Technology.

ALGORAND TECHNICAL OVERVIEW

ALGO/USD | Source: Tradingview

ALGO price, as we can see from the chart above, has been beaten badly in the recent crash led by the FTX collapse. Since the end of September, all through October to the beginning of November, ALGO had been on a slow yet steady uptrend on the charts. ALGO had even broken out of the 50 and the 200 day moving averages on the chart, and was also able to convincingly break out of the upper trendline resistance (marked in blue), rallying over 50% from the lows. But the latest crash has pushed prices back down below the YTD lows for the token, which could spell trouble for the crypto.

However, in the past two days – ALGO managed to quickly recover from the YTD lows back above the trendline support (marked in blue) and is barely trying to hold on to that. Along with that, the Relative Strength Index for the coin is also at about 43, which is weak but not too bad either, considering the price is still on the uptrend in the past 48 hours. If we see a strong recovery from current levels, we could potentially see a repeat breakout of the upper trendline resistance and also the formation of a golden crossover of the 50 and 200 day moving averages.

Read more: Algorand Price Prediction

Supply in top 100 addresses on a steady rise!

ALGO supply in top 100 addresses | Source: Coinmetrics.io

According to data form Coinmetrics.io, ALGO supply in top 100 addresses has been on the rise ever since May, post the Terra LUNA crash and the eventual crash in the market. This indicates strong underlying strength and a heavy buy-the-dip action from these large HODLers.

A strong buy-the-dip action from these large scale ALGO holders is a very good sign for the long term prospects as these are people who are in-the-know and have high confidence on the coin. The amount has risen from around 5.5 billion ALGO back in May to over 6.3 billion ALGO as of writing.

ALGO’s MVRV Ratio indicates upside potential

ALGO MVRV Ratio | Source: Coinmetrics.io

Pretty much in line with the trend observed in the previous on-chain metric mentioned above, we can see ALGO’s MVRV Ratio mimicking a similar trend on the chart attached above. It hit its lowest points between the months of May-June 2022. However, the recent crash post the FTX fiasco, which resulted ALGO losing over 30% in just two days has caused the MVRV ratio to come crashing down from 0.8 all the way to just above 0.5. However, what must be noted is that, all this time the MVRV ratio has remained well below the 1 mark, which typically signifies late stage bear market accumulation, which is in line with the observation above.

Conclusion

Summarizing from the observations above, we can say that from the technical analysis point of view, ALGO price is at a very precarious position right now, trading just around the last surviving support level – a breakdown below which could be devastating. However, on the other hand, signals of accumulation from big time HODLers derived from on-chain metrics indicate that a strong accumulation is underway, despite the poor price action. Thus, ALGO is definitely a coin that investors need to keep an eye out for as the current bearish scene could quickly change for the better.

Prices as on 16 November, 2022.