• Altcoins have shown signs of recovery this week, on-chain analysts at Santiment identified five altcoins with likely bullish potential. 
  • Using the on-chain metric MVRV divergence, DODO, GALA, MAGIC, MASK and SRM have emerged as the tokens with historic opportunities.
  • Traders have accumulated losses in altcoins since June, recent gains may not not be enough to wipe out the losses.

Altcoin traders suffered losses in the second quarter as the Bitcoin price recovered. Since then, while opportunities have presented themselves in different altcoins, the gains may not be enough to wipe out losses.

On-chain analysts at Santiment used their Market Value to Realized Value (MVRV) model to identify five altcoins in the “opportunity zone.” These altcoins are most likely to rise compared to other cryptocurrencies in the top 100 assets by market capitalization.

Also read: Bitcoin price rally likely in around six to twelve months: Arthur Hayes

Altcoins in the opportunity zone this week

Crypto intelligence tracker, Santiment, has developed an MVRV model to spot altcoins in the opportunity (likely to yield gains) and danger (likely to sell off) zones. The model is developed by comparing the MVRV values of each individual asset’s 7-day, 30-day, 6-month and 1-year timeframes to Santiment’s universal “danger” and “opportunity” zones that have been backtested as fair ranges.

The major outliers that emerge from the comparison are the top five altcoins in the opportunity/ danger zones. Using this model, analysts identified likely price gain potential in DODO, GALA, Magic (MAGIC), Mask Network (MASK) and Serum (SRM).

As seen in the chart below, DODO, GALA, MAGIC, MASK and SRM are at 85%, 85%, 95%, 88% and 107% – all values close to the opportunity zone line (100%) represented in green. This makes the altcoins the first ones likely to rally this week. Tokens in the opportunity zone are currently underbought, according to the MVRV model.

Altcoins in opportunity and danger zones according to Santiment’s MVRV model

It’s important to note that GALA’s executives are currently facing litigation, primarily a dispute between founders. On August 31, the CEO filed a derivative shareholder lawsuit against co-founders. While the legal process unfolds, traders may benefit by waiting on the sidelines for a resolution rather than scoop up the project’s tokens.

Bitcoin, altcoins, stablecoins FAQs

Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.

Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.

Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.

Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.

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About the Author: Daniel