There are thousands of altcoins in crypto, and honestly, it’s frustrating to select a few out of the lot and not regret when every altcoin except yours rallies.
Before we get into it, here’s a warning/note:
Note: None of the metrics are meant to be used as a standalone indicator. Combining these on-chain metrics with technical analysis yields the best result
A not-so-overwhelming version
Create a screener to track the altcoins that you like or find interesting and track the price until you find a high probability setup and then trade it.
A detailed version
I use Santiment’s screener to add the top altcoins I like and track metrics that help me sort the tokens to a handful that I can trade.
Here are the metrics I use:
1. Market Value to Realized Value (MVRV)
This metric is fairly simple, it tracks the PNL (profit/loss) of investors that purchased an altcoin, depending on the time frame you provide.
For example, the 30-day MVRV for BTC tracks the PNL of buyers that purchased BTC in the past month.
This is an oscillator, so it has a “zero line” and the MVRV line varies relative to this baseline.
A sudden spike in 30-day MVRV (say 50%) suggests that 50% of the investors that purchased BTC over the past month are profitable. When this happens, readers can expect a drop since the investors can book profit, pushing the price of BTC lower.
Previous peaks can be used to determine a local top.
BTC 30-day MVRV chart
(Red circles = local tops, Black circles = local bottoms)
On the contrary, a drop below the “zero line” suggests that there is widespread selling, and investors that purchased BTC over the past month are in loss.
Typically, market makers or whales tend to purchase when the market is panicking. (A similar trend is observed in the Forex markets where banks and institutions purchase the panic, which is how the supply and demand zone using order blocks are formed.)
Therefore, a negative value for 30-day MVRV is referred to as an “Opportunity zone” as this provides whales an opportunity to accumulate BTC.
So, in my screener, I sort the altcoins by 30-day MVRV and select the top five most oversold altcoins.
2. Daily Active Addresses (DAA)
This metric paints a picture of the interaction of users with the blockchain of a selected asset. If the DAA is around the average, it suggests that investors are interested in that asset.
I use this to basically gauge investors’ interest, very similar to how social volume or social dominance is used.
Note: For ETH, the DAA metric does not give a full picture due to DeFi and smart contracts.
3. Whale transaction count
This metric tracks the transactions that are worth $100,000 or more. Typically, seeing a massive spike in this metric coincides with a local top.
Hypothetically speaking, if an altcoin’s DAA has plummeted and the whale transaction metric spikes, it would be a telltale sign for an incoming drop.
Personally, I use this metric to see if there will be any selling activity from the whales. Another metric that complements this index is the Supply on exchanges, which can be used to assess the potential selling pressure of a particular altcoin present on an exchange.
Santiment screener sorted by 30-day MVRV
Disclaimer: This is NOT financial/investment advice.