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APE Escapes Danger Zone on MVRV Metric — Is Opportunity Knocking?

Published September 29, 2023 1:42 PM
Nikola Lazic
Published September 29, 2023 1:42 PM

Key Takeaways

  • APE rose by 19% from its September low.
  • On-chain data show positive signs as whales keep on accumulating.
  • Chart analysis suggests there is potential for further upside, but there are some factors to consider.

The cryptocurrency market has endured a bearish trend since November 2021, a period where altcoins typically suffer more significant losses compared to major cryptocurrencies like Bitcoin and Ethereum, often experiencing average declines of 90%.

APE coin, a governance and utility token within the APE Ecosystem, once the subject of significant hype, has plummeted by 96% from its peak to its lowest point in September. Like many other altcoins, this presents the possibility of entering an extremely undervalued territory—a potentially opportune zone for accumulation.

However, two crucial questions remain: Will the coin’s descent cease, and will it ever regain upward momentum? In this analysis, we delve into key metrics to assess whether current levels may be nearing a bottom and whether there is a compelling case for purchasing the coins at these levels.

On-chain data 

In a recent post on X, the crypto analytics platform Santiment introduced a novel metric known as the ‘MVRV Opportunity and Danger Zone’ model. The MVRV (Market Value to Realized Value) ratio is a widely used metric in the cryptocurrency realm designed to gauge the profitability of a particular cryptocurrency’s holders.

It seeks to provide insights into whether a cryptocurrency is potentially overvalued or undervalued. To determine the MVRV is dividing a cryptocurrency’s market value (or market capitalization) by its realized value.

Here’s a breakdown of the two fundamental components:

Market Value (MV): This represents the current price of the cryptocurrency multiplied by its current supply, commonly referred to as market capitalization.

Realized Value (RV): Realized value can be likened to the average cost basis of cryptocurrency holders. To calculate it, one considers the price at the last time each unit of the cryptocurrency moved (i.e., the last time it was transferred from one address to another) and sums up all these values. This offers an estimate of the total capital invested in the asset.

Santiment’s built its model upon the MVRV ratio, although precise formulas are not yet clear as it is a professional chart still in development. Nevertheless, the model provides relative values, which suffice for the purposes of analysis.

The chart provided includes a comprehensive overview of numerous cryptocurrencies and their respective values, enabling us to draw conclusions about the overall sentiment in the altcoin market. Within this analysis, APE coin stands out as one of only four cryptocurrencies displaying positive trends on a monthly time frame out of the total 112 cryptocurrencies examined.

Only GALA Surpasses APE Undervalued Opportunity Zone

Based on the insights gleaned from this chart, APE coin currently occupies the undervalued (opportunity) zone, registering at 0.75%, with only GALA surpassing it at 0.88%.

Whales are accumulating
Whales are accumulating

Examining the concentration  chart provided by IntoTheBlock, it becomes evident that whales have been steadily accumulating the coin since December 12 of the previous year. During that time, they held a mere 7.12% of the total supply, which has now grown to nearly 21%. Meanwhile, investors, while still maintaining the largest share of the supply, are gradually losing ground, mirroring a similar trend observed among retail investors.

Slightly favoring bears
Slightly favoring bears

The sentiment look balanced, with a slight tilt toward bearish sentiment as evidenced by 152 addresses selling compared to 131 addresses buying more than 1% of the daily volume in the past 7 days. This sentiment aligns with the declining price trend.

Turning our attention to the derivatives market, a positive outlook emerges on Coinglass . Over the last 24 hours, there has been a notable increase in the liquidation of short positions, indicating potential market dynamics.

More shorts liquidated
More shorts liquidated

On September 29th, short-sellers liquidated a total of $445,000 worth of positions, while long positions amounted to $203,000. This trend was even more pronounced yesterday, with $515,000 in short positions liquidated compared to just $40,000 in long positions.

Funding rate positive
Funding rate positive

The funding rate has also conveyed a positive sentiment, with it remaining in positive territory during the latter part of September.

APE Price Analysis 

Upon its market debut, APE’s price initially surged, reaching a peak of $27.64 on April 28, 2022. Subsequently, it embarked on a multi-year correction phase, which it is still undergoing.

ABC correction
ABC correction

This correction is likely best described as a significant ABC pattern, consisting of three distinct waves. The downtrend began on January 27 of this year, marked by a high of $6.40, which serves as the starting point of wave C. During this phase, a descending channel formed, characterized by a five-wave pattern that potentially concluded in September around $1.

Uptick from Mid-September

Starting from September 17, we observed an uptick, with the price inching up from just slightly above $1 to its current value of $1.29, representing a 19% recovery. Notably, the price has exhibited a five-wave pattern, and following what appears to be the conclusion of this pattern, an upward trend has commenced. Could this be an early indicator that the next bullish cycle is underway?

One more lower low?
One more lower low?

When we zoom in on the 4-hour chart and analyze the wave structure from August 14, it becomes apparent that there remains a possibility of another minor lower low. Today’s price increase could potentially represent wave 4 within a lower-degree five-wave impulse, implying that another descending move for wave 5 might be on the horizon.

According to Elliott Wave theory, wave 4 should not breach the territory of wave 2, making the horizontal level at $1.38 a point of invalidation. If the price continues its ascent and surpasses $1.40, it would provide a definitive signal that it reached the low point.

To confirm the onset of the next bullish cycle, we would ideally need to observe a macro higher low, but we’d need further analysis as the price unfolds. For the time being, it’s crucial to maintain support above $1 and sustain its upward momentum.

Disclaimer

Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.

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