Over the past seven days, Algorand’s (ALGO) price has plummeted by more than 20%, currently trading at $0.371. This recent bearish trend marks a reversal from the previous month’s rally, during which ALGO reached a multi-year high of $0.613.
Despite the decline, there has been a notable increase in the number of active addresses, as reported by IntoTheBlock. Within a 24-hour period, active addresses surged from 104,000 to 190,000, while new addresses rose from 24,000 to 95,000.
The increase in active addresses could potentially be attributed to traders offloading ALGO to mitigate their losses amid the decline. Simultaneously, the rise in new addresses may indicate a growing interest from new traders in speculative trading activities.
If the current bearish trend persists with a continuous uptick in addresses, it could signify a significant surge in selling pressure, resulting in heightened volatility and a further downward trend.
Diminished Profitability of Active Addresses
The profitability of active ALGO addresses has also experienced a substantial decline, hitting a one-month low following its peak earlier this month. At present, the profitability stands at 16%, a stark drop from the 57% reported just a fortnight ago.
A dwindling profitability among active addresses may increase selling pressure as traders aim to mitigate their losses or capitalize on existing profits from earlier trades during the rally.
If this trend of declining profitability continues, it could foster negative sentiments, potentially leading to a further decline in price.
Insights from Technical Indicators
Technical indicators observed on Algorand’s four-hour chart indicate an uptick in selling activity. The Chaikin Money Flow (CMF) is fluctuating in the negative zone, suggesting a higher selling pressure compared to buying pressure.
Similarly, the on-balance volume (OBV) indicator is hovering near its lows, indicating a decline in trading volumes.
Current charts reveal ALGO trading within a descending parallel channel, highlighting the prevailing bearish trends. A breach below the lower trendline could trigger further declines, while surpassing the resistance might pave the way for gains.
Impact of Declining DeFi Activities on the Downtrend
DeFiLlama reports a decrease in Algorand’s Total Value Locked (TVL) from $245 million to $165 million within a three-week period. This decline aligns with the increased selling activity that has led to a price drop.
Traders should monitor any potential recovery in DeFi TVL, as it could indicate an impending trend reversal. Conversely, a continued decline in DeFi volumes and activity might prolong the downtrend.