Algorand's native cryptocurrency, ALGO, has recently experienced a significant decline in price, dropping over 20% in the past week to settle at $0.371. This comes after ALGO reached a multi-year high of $0.613 earlier this month. The decrease in price has raised concerns among traders and investors, as the cryptocurrency faces increased sales pressure and diminishing profitability.
Despite the decline in price, there has been a notable increase in active addresses on the Algorand network. Within a 24-hour period, active addresses surged from 104,000 to 190,000, while new addresses rose from 24,000 to 95,000. This suggests that traders may be liquidating their holdings to limit losses or that new participants are entering the market for speculative trading. However, the simultaneous decline in price raises questions about the sustainability of this activity, as it could indicate heightened selling pressure that reinforces the downward trend.
The profitability of active addresses on the Algorand network has also declined, reaching a one-month low of 16%, down from 57% two weeks prior. This decline indicates that many traders who entered the market during the recent rally are now selling off their holdings to secure profits or mitigate losses. The decrease in profitability is likely to contribute to a negative market sentiment, intensifying selling pressure and potentially driving ALGO's price lower.
Technical analysis of Algorand's four-hour chart reveals increasing selling pressure, with the Chaikin Money Flow (CMF) currently in the negative zone. This suggests that selling activity is surpassing buying activity, a trend that may continue if market conditions do not improve. Additionally, the on-balance volume (OBV) is near its range lows, indicating reduced trading volumes. ALGO is currently trading within a descending parallel channel, highlighting the dominance of bearish trends in the market. A break below the lower trend line of this channel could lead to further declines, while a breakout above the resistance level may indicate a potential recovery.
The Total Value Locked (TVL) in Algorand's decentralized finance (DeFi) ecosystem has also declined significantly, dropping from $245 million to $165 million in the past three weeks. This decline aligns with the increased selling pressure and falling prices observed in the broader market. A rebound in DeFi activity could signal a shift in market sentiment, but the continued decline in TVL raises concerns that the current downward trend may persist.
Traders and investors are advised to closely monitor these developments, as they could play a crucial role in determining Algorand's next price movement. Without signs of recovery in DeFi activity or improvements in profitability, the bearish trend for ALGO may continue, presenting a challenging landscape for market participants. The interplay between active addresses, profitability, and DeFi engagement will be essential in assessing the future trajectory of Algorand and its native cryptocurrency. Stakeholders must remain vigilant and informed, considering both technical indicators and broader market trends.