Joseph Young · 3 mins ago · 2 min read
News › Dash › Technical Analysis
Dash’s network stats show usage growth, but technical patterns estimate a correction
Disclaimer: This article contains technical analysis, which is a methodology for forecasting the direction of prices through the study of past market data, primarily price and volume. The content presented in this article is the opinion of the author. None of the information you read on CryptoSlate should be taken as investment advice. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own diligence and consult with a financial advisor before making any investment decisions.
Over $83 billion flooded the cryptocurrency market since Jan. 3. The massive inflow of capital triggered a bull rally that was felt throughout most cryptos in the industry, but Dash stood out as one of the best performing digital assets.
As the uptrend continues to unravel, IntoTheBlock used a data-driven approach to analyze Dash’s performance while CryptoSlate took a technical approach.
Dash’s blockchain analytics show network growth
In a blog post, Eduardo Morrison, a business developer at IntoTheBlock, explained different blockchain patterns, based on the firm’s statistical models, that portray an idea about Dash’s performance during its recent parabolic advance. He stated that the price movements of this cryptocurrency appears to be directly related to an increased usage of its network.
According to Morrison, the Dash Foundation’s main objective is for its native cryptocurrency to become a medium for daily transactions. He argued that the Foundation appears to be getting closer to its goals especially in emerging or distressed economies where Dash is currently viewed as a “reliable payment method and store of value.”
“Dash has a very strong footprint in Venezuela. [for instance,] where they are achieving spectacular growth rates. From May to December 2019 they had a 562% increase in active wallets.”
As Dash’s utility continues to grow, investors seem more interested in this cryptocurrency. Based on IntoTheBlocks´s In-Out of the Money indicator, around 227,260 addresses bought Dash at an average price of $73.75 and another 128,840 addresses bought it at around $93.59. Due to the recent bullish impulse, Morrison affirmed that 47 percent of Dash holders were able to recover considerably and are now In The Money.
Approximately 85 percent of all Dash holders are actually retail investors that own less than 0.1 percent of the circulating supply. They are mostly concentrated in the western hemisphere, according to Morrison.
Moreover, Dash’s community is also expanding as more active users continue adding nodes to its network making mining more difficult over time. IntoTheBlock’s Hash Rate Indicator reveals how the speed at which mining hardwares are validating blocks has almost quadrupled in one year.
“In January 2019, the Hash Rate for Dash miners was 1.66k terahash per second while just recently on the 25th of January it reached its highest point at 5.69k TH/s.”
The exponential rise in Dash’s popularity can also be seen in its price. This cryptocurrency went from trading at a low of $40 on Jan. 3 to a high of $143 on Jan. 15. Following the 256 percent upswing, Dash reached an exhaustion point. Now, several technical patterns estimate a further correction before the continuation of the bullish trend.
Technically, a retracement is underway
The 200-three-day moving average seems to be serving as a significant resistance level containing the price of Dash from a further advance, based on the 3-day chart. If this barrier continues to hold, this cryptocurrency could retrace to find support around the 100-three-day moving average. This level of support is currently sitting around $98.
An increase in the selling pressure behind Dash around its 100-three-day moving average could trigger a steeper decline. Such a bearish impulse would likely take this crypto down to the 50-three-day moving average that sits at $71.
Adding credence to the bearish outlook, the parabolic stop and reverse, or “SAR,” presented a sell signal on Jan. 19. Every time the stop and reversal points move above the price of an asset, it is considered to be a negative sign. This bearish formation indicates that the direction of Dash’s trend has changed from bullish to bearish, based on its 1-day chart.
This is the first time since early December 2019 that the stop and reversal system turned bearish. During that time, Dash plunged nearly 29 percent after the parabolic SAR presented the bearish signal.
Furthermore, the moving average convergence divergence (MACD) recently turned bearish within the same time frame estimating a swing low. This technical indicator follows the path of a trend and calculates its momentum.
As the 12-day EMA crossed below the 26-day EMA, the odds for a further downward push increased.
Based on the multiple bearish signals that can be seen across different time frames, it seems that a pullback is underway. Nevertheless, a spike in demand for Dash that allows it to close above the 200-three-day moving average could jeopardize the bearish outlook. Such a bullish impulse could set the stage for a further advance that takes this cryptocurrency into new yearly highs.
The future looks bright
The rise in popularity that Dash has experienced is related to some “interesting features” that have been added to its protocol over the years, according to Morrison.
InstantSend, for instance, allows users to send Dash transactions with lightning speed. Meanwhile, PrivateSend enables anonymous transactions within the network. In addition, ChainLocks was recently integrated to eliminate the threat of a 51 percent mining attack.
These set of features make Dash a very robust cryptocurrency “with a strong focus on speed, privacy, and near-zero transaction fees.” And, since the network operates as a self-governing and self-funding model, it is guaranteed that 10 percent of the mining rewards goes back to the Dash Foundation to fund improvements on the protocol.
Despite the vigorous infrastructure that this privacy-focused cryptocurrency has, it currently sits on top of a weak support level, from a technical perspective. If the current price level fails to continue to hold, a steep correction could be expected.
After the recent rally, a downward move could help maintain the uptrend healthy by allowing sideliners to get back into the market. A new inflow of capital could potentially take Dash to resume its uptrend pushing it into higher highs.