Your Algorand [ALGO] holdings might suffer a drop in value because of this

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  • ALGO’s price has ral­lied tremen­dous­ly since 2023 began.
  • How­ev­er, a price rever­sal might be underway.

While Algorand’s [ALGO] price might have ral­lied by about 10% in the last sev­en days, a steady decline in its Chaikin Mon­ey Flow (CMF) on a dai­ly chart cre­at­ed a bear­ish diver­gence that typ­i­cal­ly pre­cedes a price reversal. 


Read Algo­rand [ALGO] Price Pre­dic­tion 2023–24


Accord­ing to data from Coin­Mar­ket­Cap, ALGO trad­ed at $0.258 at press time. On a year-to-date basis, the alt’s price has grown by 47%.

Where’s the risk for Algorand?

How­ev­er, ALGO hold­ers might be at risk of shed­ding these gains as there has not been a cor­re­spond­ing ral­ly in the alt’s CMF in the last week. In fact, it has been on a down­trend and has since dropped by 42%.

When an asset’s price ral­lies to a high­er high into over­bought zones and its CMF diverges into a low­er high and falls, this cre­ates a bear­ish diver­gence that is typ­i­cal­ly tak­en as a sell signal. 

This bear­ish diver­gence often sug­gests that the mar­ket is over­bought and that a price cor­rec­tion is pos­si­ble. This might imply that, despite the ral­ly in the assets’ price, the pur­chas­ing pres­sure behind it is less­en­ing, sug­gest­ing that the mar­ket is get­ting more neg­a­tive and traders are becom­ing more cau­tious about buy­ing at such high levels.

More­over, key indi­ca­tors were pegged at over­bought highs as of this writ­ing. For exam­ple, ALGO’s Rel­a­tive Strength Index (RSI) was 70.15 at press time. Like­wise, its Mon­ey Flow Index (MFI) rest­ed at 73.11.

The over­bought posi­tions occu­pied by these momen­tum indi­ca­tors are typ­i­cal­ly marked by buy­ers’ exhaus­tion. Often, at these lev­els, buy­ers in the mar­ket find it chal­leng­ing to sus­tain any fur­ther price ral­ly, there­by giv­ing way to the bears. 

Source: ALGO/USDT on TradingView

Less development activity and growing negative sentiment

On-chain analy­sis of the Algo­rand ecosys­tem revealed a decline in devel­op­ment activ­i­ty since 1 Jan­u­ary. Accord­ing to data from San­ti­ment, devel­op­ment activ­i­ty on Algo­rand dropped by 9% since 2023 started.


Is your port­fo­lio green? Check out the Algo­rand prof­it calculator


Inter­est­ing­ly, while ALGO’s val­ue has climbed by almost 50% since 1 Jan­u­ary, the alt­coin has been most­ly trailed by neg­a­tive sen­ti­ment. Since the year start­ed, ALGO only enjoyed pos­i­tive sen­ti­ment between 17 – 20 Jan­u­ary before sen­ti­ment flipped back to negative. 

As of this writ­ing, the weight­ed sen­ti­ment was ‑0.284, data from San­ti­ment showed. 

Source: San­ti­ment

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