Over the past 30 days, the price of Algorand (ALGO) has increased by 360% after a major price surge of Altcoins. As a result, the number of active addresses on the Algorand network has reached its highest level since November 07.
Typically, an increase in active addresses is considered a positive signal for the price. However, on-chain analysis explains why this may not be the case.
Algorand network activity increases
According to IntoTheBlock, the number of active addresses on Algorand has increased to 427,230 at the time of writing. For those unfamiliar, active addresses refer to the number of unique wallets that have successfully transacted on a blockchain.
This metric counts both senders and receivers. When this index increases, it indicates rising user participation, which is usually a positive signal depending on price action. Conversely, a decline in active addresses means user participation has decreased, which is a bearish signal.
For active addresses to be a positive signal, they must increase along with the price. But in this case, the price of ALGO has decreased by 10% in the past 24 hours. Therefore, the increase in network activity may not support the next uptrend, but that is not the whole story.
Algorand active addresses. Source: IntoTheBlock Another indicator suggesting ALGO's price may struggle to recover is social dominance. Social dominance refers to the ratio of discussions related to a cryptocurrency compared to other assets in the top 100. When this metric increases, there will be more discussions about the altcoin. In most cases, this drives higher demand, leading to an increase in value.
However, according to Santiment, Algorand's social dominance has decreased from 1.56% on November 30 to 0.71% today. Given the current situation, the value of ALGO may continue to decline.
Algorand's social dominance. Source: Santiment ALGO price prediction: Potential for further decline
At the time of writing, the price of ALGO is $0.51. On the 4-hour chart, the altcoin appears to be on a downward trajectory, heading below the 20-EMA. EMA is a technical indicator that tracks the price changes of an asset over a specific period. When the price is above the EMA, the trend is bullish. But in the case of Algorand, the price decline suggests the token is at risk of a significant correction.
Algorand 4-hour analysis. Source: TradingView If confirmed, the price of Algorand could drop to $0.38. However, if buying pressure increases and the Altcoin does not fall below the EMA, this prediction may not materialize. Instead, the value could rise to $0.61.
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