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MANA Price Analysis: VR world matures but user numbers still low

The Decentraland ecosystem has launched a number of impressive updates in 2019 including a new 3D scene building tool and integration with the HTC EXODUS 1 blockchain phone - creating new value for the MANA token. Active app and token user numbers remain lackluster, however, creating long term concerns. While short term technicals lean bearish, fundamental signals are mixed.

MANA is the native ERC-20 token of Decentraland, an Ethereum based virtual reality platform. In Decentraland’s virtual world, users can purchase digitized plots of virtual ‘LAND’ with MANA. Users are free to use the LAND as they see fit. As the VR world matures, MANA will be usable within Decentraland to purchase goods and services.

There are three layers within the MANA protocol; a consensus layer, which tracks ownership and LAND contracts through an ETH smart contract, a LAND content layer, where a decentralized distribution system renders the contract in the virtual world, and a real time layer that provides peer-to-peer connections for users to interact with each other.

While the price of MANA has fallen ~15% in the last 7 days, the token is up over 30% in the last 90 days. The project’s ICO was highly touted and attracted $24 million of investment in 35 seconds, while drawing in over 10,000 interested investors, many of whom were turned away because of a cap on buy-ins. MANA is currently down ~80% from an all time price high achieved in early January 2018.

While Decentraland is often described as a VR solution, the project’s features are accessible across multiple platforms. When asked specifically about VR headset access for Decentraland in a community AMA, the official team response was, “We’re not focused on VR, we’re making sure the experience is fun in all platforms: Desktop, Mobile, and VR. While VR amazes me, the market penetration is very low.”

Each plot of LAND is represented by a unique, non fungible ERC-721 token. Plots of LAND can be purchased on a peer-to-peer decentralized marketplace (https://market.decentraland.org/).

In the past, new plots of LAND were offered to the community at intervals via public auction rounds that lasted for over a week. The last public auction was held on December 28th, 2018. All LAND in Decentraland has now been claimed.

Every accepted bid incurs a 1% transaction fee. 1% of all MANA transacted is burned and completely removed from circulation. Neither Decentraland or the seller receive transaction fee profits from any marketplace LAND purchase. The burning of MANA on LAND transactions only began in late January 2019 following a community vote.

In late February, Decentraland created a protocol for ‘marketplace bids’. These let any user make bids on any plot of LAND in the ecosystem, even if it is not yet listed for sale. Existing owners are notified of the bid and can then make a decision on whether they accept it or not. Like other sales on Decentraland, with marketplace bids, all peer-to-peer value transfer confirmations occur on chain, verified within the ERC-721 blockchain, without the need for a middle man.

LAND owners can create, materialize, and monetize content and applications. LAND is always owned by individual community members, giving owners full control over their creations. Landowners control the content that is published on their portion of land, which is identified by a set of cartesian coordinates (x,y). Content could be anything from static 3D scenes to interactive systems, such as games.

Decentraland recently ran a creator contest where Landowners were invited to develop 3D scenery using the platform’s Builder tool. 4000 active builders built 9000 scenes across 45,000 different LAND parcels. Contest partners included Bittrex and HTC Exodus. The event provided a glimpse of what an active Decentraland virtual world might look like in the future with a number of impressive scenes built. The event showed that Decentraland’s building infrastructure had grown significantly since the projects early scene building showcases in 2018.

FA1

(3D scene build for competition)

FA2

(3D scene build for competition)

Decentraland uses an internally built community governance mechanism called Agora, with decision making broken down into districts within the Decentraland virtual reality world.

Any user can put up a proposal for the set up of a new district on Github. Proposals are then reviewed by the Decentraland company and released for investors to assess and contribute. An investment into a district costs 1000 MANA and returns the investor 1 parcel of LAND. New Districts are allocated space in Decentraland based on the size of the public investor interest for a proposal. At the end of a District allocation event, all invested tokens (1000 MANA LAND parcel contributions) are burned.

The first public District event occurred in September 2017. Created Districts, which tend to revolve around a theme or hobby, included: The Whale club (an ICO enthusiast group), NEO TOKYO (A Japanese orientated district) and SF Zone (for Science Fiction fans).

Agora functions as an off-chain voting platform that allows users to vote on issues simply by submitting a cryptographically signed message. Polls run within Districts and between District members. The weight of a user vote is determined by the amount of LAND that is contributed to the District. The more contributions a user has made to a District, the more their stake in the project, so your vote will be weighted more heavily.

In December 2018, the Decentraland Dapp integrated the Kyber Network and now supports payments for LAND auction payments via 8 different tokens (MKR, DAI, BNB, KNC, ZIL, RCN, ELF and SNT).

In late March, Decentraland introduced its Builder tool which lets users create 3D scenes for LAND and ESTATES using a simple drag-and-drop interface. The Builder does not replace the Decentraland editor and developer SDKs used for the most robust 3D content creation tasks but provides a simple way to interact with the VR world.

Beyond this, it is possible to launch unique user Avatars within the VR world to interact with LAND and deploy crypto collectibles NFTs like Ethermons

FA3

Current Decentraland Map, source: DCLplazas.com

LAND (Dark Grey) – Privately owned LAND parcels. Can be bought and sold on the marketplace.

LAND (Black) – This LAND remained unsold after the first auction in December 2017. It was later sold in the second Decentraland auction in December 2018.

DISTRICTS (Blue) – Privately owned, themed communities.

PLAZAS (Large Green Squares) – The area of the map where players are expected to respawn and generate high footfall. Plazas are not for sale.

ROADS (Light Grey, Straight Lines) Roads are not for sale.

A major factor in present-buyer interest of MANA has been medium-long term speculative considerations. While MANA has direct utility to make purchases of LAND on Dutch auction or on marketplace bids, there is very little that can be done with this LAND once purchased.

‘Flipping’ LAND (buying LAND parcels at cheaper rates with the plan to then resell them later during periods of higher aggregate market demand) emerged as a popular way to participate in the Decentraland ecosystem and drove an increase in on-chain transaction volumes.

LAND owners, however, cannot yet monetize their LAND parcels or even derive much personal entertainment value out of building on them. Building tools remain challenging to use for the general public and as a peer-to-peer solution, Decentraland will benefit from network effects.

The drag-and-drop scene Builder is a major step forward for the project because it makes Decentraland more accessible. More complex 3D content creation, and ecosystem interactables like Casinos do not seem to have been built at scale yet within Decentraland. This limits MANA’s short term utility and scope.

While the LAND ecosystem remains small, with limited mainstream participation or utility, LAND owners are holding their ERC-20 and ERC-721 tokens. For many, buying MANA at present day prices is based on a belief that the network will grow into a thriving, active, decentralized, and community governed VR world. Anyone that has seen the movie, Ready Player One, can understand the potential.

A sizable MANA investment and vocal interest in the Decentraland ecosystem from well-known crypto investor Barry Silbert of DCG and Grayscale investments was seen as a sign of institutional interest in the project. However, at present, the MANA page on the Grayscale investment trust official website is missing.

In late February, news emerged from the Barcelona Mobile phone expo that HTC blockchain smartphone, EXODUS 1, would come packaged with support for Decentraland and MANA, using the ZION vault wallet, causing the price of the token to soar. The price of MANA rose over 30% in one day, and since the news event the price of the token remains up ~40%.

Because of the name value of HTC and the perception of the EXODUS 1 to be a leader in the emerging blockchain smartphone space, the tie-up generated a strong response from markets. The HTC EXODUS 1 was released to middling reviews in Q1 2019. The speculation fueled gains from the initial news leak have since pulled back, however, a second version of the phone is set to be released in H2 2019 and may reignite buying pressure for the MANA token.

Over the last 30 days, 234 LAND auction transactions have generated 4,246,923 MANA in sales, equating to an average USD transaction value of $1,008.54.

FA4

Source: Nonfungible.com

There tend to be very few zero LAND sale days, with anywhere between 2-15 transactions occurring every day. There are spikes in activity around key event dates both in terms of number of transactions and average USD value of transactions. Around February 25th is when the HTC EXODUS 1 news broke, while a month later the drag-and-drop Builder tool was released.

The Builder was a major release that increased the fundamental value of the Decentraland project by making it significantly easier to build 3D scenery on top of owned LAND. The spike in LAND auction activity, however, was very short term and the average USD value of LAND plots sold has fallen away since late March through to late April.

FA5

Source:StateoftheDapps.com

Backing up the LAND auction data, both active users and transactions in the Decentraland app are down since the start of April, however, development activity has held steady sending mixed medium/long value signals. State of the dApps lists Decentraland as the 36th most popular dApp in the crypto ecosystem and it is the most used and voluminous dApp in the ‘Property’ sub category.

FA6

Source:App.Santiment.net

The Decentraland foundation has sold most of the 86,000 ETH raised during its ICO, sitting on remaining reserves of ~ 1,250. Decentraland appears to have sold most of its ETH in early to mid February, when the price of ETH was in the USD 850-900 range and well above the price of ETH during the MANA ICO, implying that the group likely made a significant profit on these sales. Decentraland last sold a portion of their ETH on February 15th, 2019 (~200 ETH).

Onchain activity

NVT Signal

Derived from the NVT ratio (Network Value to Transactions), the NVT signal is a responsive blockchain valuation metric developed by Willy Woo and Dmitriy Kalichkin. It is akin to the price/earnings ratio signals used in traditional equity markets. Crypto markets are prone to bubbles of speculative purchasing that are not reflective of underlying network performance and activity. The NVT signal is a tool to assess drivers of these patterns.

The NVT signal provides some insight into what stage of a price cycle a token is at. A high NVT signal is indicative of a network that is going through one of these bubble periods, and may move towards a position of becoming overbought/overvalued, as market speculation runs out of steam.

FA7

Onchain data sourced from Coinmetrics.io community data

Onchain volume of MANA has shown signs of historic inconsistency, and is often characterized by short, sharp drops and rises in onchain volume. This is a sign of an immature network and limited token utility. The three largest on-chain Ethereum accounts holding MANA are the central Decentraland foundation, a wallet connected to Binance and a wallet connected to Bittrex.

On-chain volume of MANA is differentiated because of the unreleased LAND auction which likely creates short term bursts in on-chain volume.

The short term signals presented by MANA’s NVTS are firmly bullish. The NVTS line has hit a historically indicated floor with an inflection point of around 20 points since late March and has held this position. Drivers of the volume may be the Builder tool and the release of built in mobile MANA solutions as part of the HTC EXODUS 1.

In the immediate future the MANA NVTS looks set to start rising upwards and create positive fundamental price pressure (in the past this hasn’t always led to positive price gains). The NVTS signal is that MANA is short term oversold. This means that under any positive speculative momentum from wider ecosystem sentiment, or MANA specific evaluations, there is room to push the price of the token up to levels of between $0.06-$0.10 based on historical indications.

The NVTS hit a floor around the dates of the last unreleased LAND auction between December 10th and December 24th. The auction created a surge in onchain volume as MANA was used in large amounts to bid on the fixed allocation of parcels. The auction also completed the sale of all unclaimed LAND from the Decentraland foundation to the community, and as such the extended sale period had strong FOMO appeal.

The second largest LAND holder outside of the Decentraland Estate account, 0x8caefa3d9f33e90ef8bc32523cd0ad41972244e0 appears to have picked up a large number of individual LAND plots on December 23rd during the auction.

FA8

Source: Etherscan.io

PMR

Metcalfe’s law is a measure of connections in a network, as established by Robert Metcalfe, the founder of Ethernet. It has subsequently been used to analyze the true value of network-based financial products like Facebook and Bitcoin. By comparing it to price, it can provide a useful tool to assess whether a token is over or undervalued.

It is also a more straightforward metric to assess when compared to onchain transaction volume, which can be challenging to measure accurately in USD terms. Addresses are measured as the number of unique sending and receiving addresses participating in transactions daily.

FA9

Onchain data sourced from Coinmetrics.io community data

On a typical day in 2019, there were somewhere between 200-300 active MANA addresses, a small number. This is unsurprising due to the limited utility of the MANA token. As suggested earlier, because Decentraland is a public community focused project, MANA’s value is likely tied to the size of its attached network effect.

Demand for more LAND based projects and District activity will be driven by more users interacting with the Decentraland virtual world. New interactables built within Decentraland will eventually attract new users to interact with the VR world. This is a two sided value loop that should expand organically with active address growth as both sides of the marketplace grow.

Currently token value dominates Metcalfe’s law, suggesting the token’s primary value comes from speculation and belief about what the token may be worth in the future.

Exchanges and trading pairs

FA10

The most popular trading option for MANA is BTC and the pair handles close to 60% of daily trading volume. The second most popular market is the MANA/USDT pair and together the top two pairs make up over 95% of daily trading volume. The ETH pair is next most popular. Fiat transactions with MANA are also available in Euro, Indian Rupee and US dollar fiat options. The USD value of daily volume of the entire MANA trading market is ~USD 8 million.

FA11

BTC Markets dominate the MANA trading ecosystem, with 3 pairs in the top 5 when markets are broken down by exchange. The MANA/BTC and MANA/USDT markets on the OKEx exchange currently handle over 70% of daily trading volume. MANA is also tradeable on visible and trusted exchanges such as Bittrex, Binance and Kucoin.

Technical analysis

Moving Averages and Price Momentum

On the 1D chart, MANA has followed a negative linear price trend with a Pearson’s R correlation between time and price of ~0.77 (not shown), which resulted in a death cross back in August 2018. However, since early February 2019, price has rallied sharply, which has put a golden cross in sight. However, price recently fell beneath both the 50 and 200 day EMAs, and the 50 day EMA is currently acting as resistance near $0.05.

TA1

Additionally, on the 1D chart, price is currently confined within the 0.618 and 0.786 Fibonacci retracement levels of $0.06 and $0.048, respectively. Currently, the 0.786 level held as support, which may slow the momentum decline. However, If buying volume remains diminished, a fresh death cross is likely in the near term.

TA2

Lastly, on the 1D chart, the volume flow indicator (VFI) has never been beneath 0, and consistently bounced off it in 2019. If this support trend maintains, price is likely to continue its upward trend back towards the 0.618 Fibonacci level of $0.06.

TA3

Ichimoku Clouds with Relative Strength Indicator (RSI)

The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).

The status of the current Cloud metrics on the 1D frame with singled settings (10/30/60/30) for quicker signals is bearish: price is below the Cloud, Cloud is bearish, the TK cross is bearish, and the Lagging Span is above price and the Cloud.

A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan, Kijun, or Senkou A as their trailing stop.

Price completed a Kumo breakout in late-March 2018, but failed to maintain it. Currently, price is beneath the Cloud, which has thinned during the recent low volatility period. If buying volume does increase for MANA, a new Kumo breakout would be easier given the depth of the existing Cloud and RSI metric of 40. If a breakout occurs, price will need to break above $0.06, with future targets of $0.066 and $0.07. If a negative breakout ensues, support levels are $0.045 and $0.038.

TA4

The status of the current Cloud metrics on the 1D time frame with doubled settings (20/60/120/30) for more accurate signals is mixed: price is below the Cloud, Cloud is bullish, the TK cross is bearish, and the Lagging Span is in Cloud and touching price.

Analysis using the slower settings yield similar results as the faster settings. The main differentiation is that price will need to re-breach above $0.063 for a new Kumo breakout. Price targets would include $0.066 and $0.072.

TA5

Conclusion

MANA’s exciting VR narrative and value proposition have made it one of the most discussed ERC20 tokens in the crypto space, helping the project reach a large valuation and market cap.

Plots of LAND continue to be bought and sold everyday using MANA. Development of Decentraland continues to progress with new tools, hardware solutions and interactables being released for the VR world. On-chain volume indicators also send firmly bullish short term signals.

However, because the majority of the native token’s value is derived from speculation of future value, there are long term risks involved with buying MANA. The majority of the economic value built into holding VR LAND has not been realized and current low active address numbers add to these concerns.

The technical indicators for MANA slightly favor the bears at present. On the 1D chart, both the fast-setting trader (10/30/60/30) and slow-setting trader (20/60/120/30) will await a new Kumo breakout above $0.06 and $0.063, respectively, before entering a long position. A successful Kumo breakout will yield price targets of $0.066, $0.07, and $0.072, while a negative breakout will highlight support levels of $0.045 and $0.038.


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