The active addresses of ALGO have increased from 104K to 190K in just 24 hours
These addresses may be selling, after the price of altcoins dropped 20%
The price of Algorand (ALGO) has dropped over 20% in the past seven days, trading at $0.371 at the time of writing. The current downtrend appears to be a reversal from the bullish rally earlier in the month when ALGO reached a multi-year high of $0.613.
However, in the context of falling prices, the number of active addresses has increased, according to data from IntoTheBlock. These addresses have risen from 104K to 190K in just 24 hours. At the same time, the number of new addresses also surged from 24K to 95K.
Source: IntoTheBlock
The spike in active addresses may be the result of traders selling ALGO to minimize losses during the price downturn. Meanwhile, the increase in new addresses could be a sign of new traders entering the speculative activity.
If ALGO cannot recover from the ongoing downtrend while the number of addresses continues to rise, it will indicate strong selling activity. This could lead to an unstable downtrend.
See more: Algorand TVL increases by 300%, can ALGO keep up?
Profits from active addresses are declining
The profits of active ALGO addresses have also sharply declined, hitting the lowest level of the month after peaking at the beginning of the month. At the time of writing, profits from these addresses stand at 16% – a notable drop compared to 57% just two weeks ago.
Source: IntoTheBlock
If these addresses increasingly become unprofitable, selling pressure may increase as traders seek to minimize losses. It could also suggest that traders who bought in during the bullish wave may be taking profits.
If profits continue to decline, this could lead to negative sentiment and the downtrend may push prices lower.
Technical indicators suggest THIS
Technical indicators on Algorand's four-hour chart reveal that selling activity has increased. The Chaikin Money Flow (CMF) indicator seems to be fluctuating in the negative region, implying that selling pressure has been higher than buying pressure.
On the other hand, the on-balance volume (OBV) indicator is also fluctuating at low levels of the range, indicating that trading volume has decreased.
(Source: Tradingview)
On the chart, ALGO appears to be trading within a downward parallel channel, indicating that bearish trends are prevailing. Dropping below the lower resistance threshold of this channel could trigger further declines, while breaking through the resistance zone could stimulate bullish rallies.
Declining DeFi activity could drive the downtrend
According to DeFiLlama, Algorand's Total Value Locked (TVL) has dropped from $245 million to $165 million in three weeks. This decline coincides with increasing selling activity that has pushed prices lower on the charts.
(Source: DeFiLlama)
Traders should pay attention to the recovery in DeFi's TVL as it could forecast a trend reversal. Conversely, if DeFi's volume and activity continue to decline, this could prolong the downtrend.
