When the larger crypto market saw the brunt of the Bitcoin rally heading south, Wrapped Bitcoin (WBTC) and Wrapped Ethereum (WETH) did no better. Although these alts reflected more or less the same price movement as the top two coins, Bitcoin and Ethereum, respectively, certain alarming spikes and dips in their metrics pointed to investor actions and patterns that were noteworthy amid this carnage.
What do new address patterns indicate?
On July 18, WETH recorded a rather unusual increase in new addresses, which brought the total number of new addresses to a staggering 3596. That number was almost double what it was on May 1 of this year. While several factors may have contributed, the fall in gas prices stands out and could be the largest contributor.
In fact, the following graph clearly shows a connection between low gas prices and the increase in new addresses for WETH.
Additionally, the number of new addresses for WBTC has been found to have decreased since June 15, and the October 2020 level has been tested at the time of writing. While the total number of addresses doesn’t necessarily suggest a bearish or bullish trend, they do indicate the possibility of increased liquidity in the DeFi space.
A Blog from Consensys had recently pointed out that the rise of the decentralized exchanges (DEXs) and the increase in their trading volume were due to WETH, which makes it easy to swap ETH for any other ERC-20 token.
Maker DAO Events: Liquidation, Debt Creation, and Repayment Activities
The sheer increase in WETH new addresses could also be attributed to the debt repayment in Maker. A recent Santiment report highlighted that ETH’s recent price drop led to new spikes in debt repayment (backed by WETH) as participants became nervous about liquidating their assets.
One look at the general market sentiment through this metric shows that this is a good sign that confidence is waning. Closely observing the times this behavior occurred (debt repayment) on the chart often marked the bottom for an upturn.
Next, another current report stressed that no new debt was created, suggesting a lack of trader confidence in the minting of new DAI. In liquidations, strong spikes indicate a severe level of pain, and a look at liquidations in the past has shown that liquidations “tend to pinpoint the bottom. “It means we might see something similar for a bounceback.
In addition, sharp spikes in debt accumulation indicated the potential for further price erosion. A six month period showed how much debt we might see for further decline, and it underscored that there is definitely more than we can see now.
What about WBTC?
Compared to WETH, WBTC had fewer new addresses. However, a look at the 1-day chart showed that active addresses for WBTC have recently hit monthly highs. In addition, the token’s social dominance also rose to a high level, last seen in January of this year. This indicated increased interest and traction for the token.
This rise in social dominance did not last long, however, and fell sharply shortly afterwards.