Can Traders Capitalize on Algorand’s Rally?

• Algorand’s price dropped 20% amid rising selling pressure and lower profitability.

• Active addresses increased, but DeFi activity continues to fall.

Algorand’s (ALGO) price has dropped over 20% in the past week, trading at $0.371. This significant decline comes after ALGO reached a multi-year high of $0.613 earlier this month, marking a stark reversal in market trends.

Spike in Active Addresses Amid Price Drop

Despite the bearish trend, Algorand has witnessed a notable surge in active addresses. Data from IntoTheBlock reveals that active addresses climbed from 104,000 to 190,000 in just 24 hours. Similarly, new addresses increased from 24,000 to 95,000 during the same period. 

This activity could reflect traders liquidating their holdings to cut losses or new entrants engaging in speculative trading. If the price continues to decline in tandem with rising active addresses, it may signal heightened selling activity and intensify the ongoing downtrend.

Profitability Decline Fuels Bearish Sentiment

The profitability of active addresses has dropped to a one-month low, currently standing at 16%, down from 57% recorded two weeks ago. This sharp decline suggests that many traders who participated during the recent rally are now selling off to secure profits or mitigate losses. Persistently falling profitability could amplify negative market sentiment and exacerbate selling pressure, pushing ALGO’s price even lower.

Technical analysis of Algorand’s four-hour chart indicates rising selling pressure. The Chaikin Money Flow (CMF) is currently in the negative zone, reflecting an imbalance where selling activity outweighs buying. Additionally, the on-balance volume (OBV) is hovering near range lows, pointing to reduced trading volumes. ALGO is trading within a descending parallel channel, suggesting that bearish trends dominate the market.

A breach below the channel’s lower trendline could trigger further declines, while breaking above the resistance level could signal potential recovery.

DeFi Activity Adds to Bearish Momentum

The Total Value Locked (TVL) in Algorand’s DeFi ecosystem has dropped significantly, declining from $245 million to $165 million in just three weeks, according to DeFiLlama. This reduction aligns with increased selling pressure and declining prices. A rebound in DeFi activity could indicate a shift in market sentiment, but continued declines in TVL may prolong the current downtrend.

Traders and investors should closely monitor these factors as they could play a pivotal role in determining Algorand’s next price movement. Without signs of recovery in DeFi activity or profitability, ALGO’s bearish trajectory could persist.