Is VIRTUAL’s 33% rally a trap? Here’s what on-chain signals say

Key Takeaways

Is the recent Virtuals Protocol backed by genuine demand?

Yes, the spot market volume has increased dramatically, and on-chain metrics showed steady accumulation amongst holders.

Why is VIRTUAL’s price outlook still bearish?

The structure on the 1-day timeframe, combined with the resistance levels at $1.2 and $1.26, still poses a considerable threat to bullish hopes of recovery.

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Virtuals Protocol [VIRTUAL] posted a 33.5% price gain over the past 24 hours, as of writing. Its daily trading volume saw a notable 391% increase.

This took the token’s price above the key $1 level, sparking bullish hope for a recovery.

However, the market-wide sentiment remained fearful. Only a few assets have rebounded strongly after the liquidation event on the 10th of October. Virtuals Protocol showed some positive signs on-chain, but it might not be enough.

The Mean Coin Age has been trending higher since the final week of August. This uptrend saw some hiccups in recent days, but the continued uptrend showed VIRTUAL accumulation amongst holders even though the price trended lower.

The dormant circulation saw a sudden spike over the past two weeks after a quiet start to October. This explained the mean coin age’s stutters and showed fear amongst holders.

Worryingly, the daily active addresses and the network growth were nowhere near the peaks from May or January. There was an uptick in address activity on the 24th of October, when the token price jumped toward $1.

The network growth also saw a slight uptick. In the coming weeks, both metrics need to advance much higher to convince Virtuals Protocol investors of bullish network conditions.

Technical analysis shows bearish VIRTUAL bias

On the 1-day chart, the momentum was bearish, but the MACD showed it was recovering. The recent buying volume was enough to send the A/D indicator to new local highs. Both seemed to be encouraging signs.

Yet, VIRTUAL has rallied into a supply zone at $1. This level had been a support since late August, and was finally breached in October’s sell-off. It likely won’t be reclaimed quickly, especially when most of the rest of the market also struggled.

If the rally continues past $1.2 and $1.26, with high trading volume bars, it would be a reliable sign that bulls were back in control. Until then, traders and investors can beware of a liquidity grab over the weekend, followed by a continued downtrend.