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NEO Price Analysis: Catalyst required

Following a challenging 2018, the NEO community will hope that the new year brings with it an opportunity to reset sentiment. Dapp and infrastructure development has pushed forward despite the bear market, and some value has been retained thanks to a unique blockchain design that offers core advantage. Whether NEO will be able to regain some of its lost value in the coming year and compete in the platform blockchain space, will depend on a combination of internal and market factors.

NEO has often been referred to as the ‘Chinese Ethereum’. A platform blockchain designed to host ICOs and Dapps using smart contracts powered by its own version of gas, developed by a team originally from Mainland China with apparent strong links to enterprise, investors and independent app developers in the region.

NEO currently trades at ~$9, down a significant 96% from an all time high achieved in mid-January 2017. While much of the fall in value has been driven by general bearish sentiment surrounding the entire crypto ecosystem and the ICO space, NEO has faced a number of unique challenges.

For example, smart contract audits from as recently as October have found major code vulnerabilities in NEO NEP-5 contracts (the NEO network’s most commonly used ICO protocol). A particular flaw allowed users to artificially add to the total supply of a major NEO project, Deepbrain chain, by transferring their tokens to an unspecified address. As such, NEO smart contracts have been reported to be challenging to work with and buggy.

Historically, the ICO and Dapp ecosystem of NEO has also had little success at bringing in market leading crypto developers and projects as its primary rival Ethereum. There is currently only one asset hosted on NEO amongst the top 50 crypto tokens by market cap, Ontology (ONT). By comparison, at the time of writing, Ethereum has 11 — Binance, Maker, USD coin, Ziliqa, 0x, BAT, Chainlink, ICON, Paxos, Augur and Aeternity.

Newer blockchains like EOS & Tron, have managed to create unique ecosystem activity through high transaction, low fee Dapp transactions that generally revolve around gambling. Both these networks have crossed past NEO’s transaction count and despite average transaction value being higher on the NEO chain, transaction volume on both chains far exceeds NEO’s.. EOS generally does 4 times as much USD volume, for example, while Tron does ~2.5 times as much.

These emerging platform blockchain contenders have further marginalized NEO’s position and reduced the wider utility of the NEO token.

Transaction count NEO others (1)

In the second half of 2018 recently launched zero-fee blockchain platforms began attracting significant users, and their transaction counts surged past activity on the NEO platform. These networks handle over 500x the number of daily transactions as NEO. Data from

NEO average value

USD Average value of transaction on NEO is generally 10-20 times higher than EOS and TRX because of the large portion of low or zero value transactions on these two networks driven by low fees. This may endorse a narrative that NEO is a blockchain more applicable for high value enterprise blockchain models. Data from

Despite challenges presented by the emergence of competitor blockchains & tokens with similar value propositions, and the growing pains associated with building a novel smart contract solution, NEO retains a strong long term value proposition.

NEO is capable of very fast and secure transactions leveraging its unique delegated byzantine fault tolerance consensus protocol. It also supports programmers from a number of languages including C#, Java & Python and has built an active international community of developers and supporters — with a large presence in Europe and Brazil).

Trading pairs and exchanges

NEO 7day chart pairs

NEO 7 day price chart and most popular markets. Source: Brave New Coin.

The most popular trading pairs for NEO are crypto-to-crypto with the USDT/NEO, BTC/NEO and ETH/NEO pairs making up 86% of daily trading volume. The dollar value of daily NEO/USDT trading exceeds $6.5 million, indicating an active liquid market.

NEO pairs3

The most popular exchanges by pair are geographically Asian and likely service a global customer because of their minimal KYC/AML sign up requirements. Binance leads NEO onramps, offering the 1st and 6th most popular NEO markets.

Idiosyncratic chain design

NEO’s delegated byzantine fault tolerance consensus algorithm has key some advantages. For example, the network likely has an increased security layer becaused transaction verifiers (in NEO, they are known as bookkeepers) are all permissioned (not anonymous) and have incentives aligned because of accountability.

This means there is a very low chance of bad actor block producers on the network. The NEO chain is also by design unforkable, with only one block being proposed at any time. In practice this means transaction time is completely equal to block time, making NEO a very unique blockchain at an operational level.

Pow chain

The standard ‘look’ of a POW or POS chain — with transactions needing to find the longest chain before finalizing.

NEO chain

The NEO dbft chain is not dependent on confirmations of other transactions

This ‘perfect finality’ characteristic of the NEO blockchain can only operate because of its ‘trusted’ node structure. This does lead to advantages of expedited transactions, which are likely preferred by the large enterprise projects that NEO proposes to target.

These design decisions, however, mean NEO loses significant advantages that more public, Proof-of-work blockchains achieve with a more distributed blockchain and higher hash rate.

Networks like Ethereum, for example, are able to offer censorship resistance and immutability of transactions, and less governance power between nodes with greater transparency of network activity.

With this in mind, granular fundamental data is limited with metrics like Hash rate, Difficulty, Days destroyed and individual Dapp usage, unavailable or irrelevant. However, data on onchain transactions, transaction volume and active addresses can be gathered using NEO block explorers.

Onchain valuation metrics

NVT signal

Derived from the NVT ratio, the NVT signal is a responsive blockchain valuation metric developed by Willy Woo and Dmitry Kalichkin. Crypto markets are prone to bubbles of speculative purchasing, not backed up by underlying network performance and activity. The NVT signal provides some insight into what stage of this price cycle a token may be in.

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, because of the market’s speculative assessments running out of steam.


NEOs NVT signal leveled off in 2018, following large erratic fluctuations shortly following the network’s mainnet launch in late 2016. NVT signal has maintained a stable range between ~10-60 points in the last year.

This indicates that there has been some continuous, stable underlying network activity, and a floor of around ~8 NVT signal points has been set. Once this floor has been hit upward fundamental pressure is put on price alongside existing speculative momentum.

NVT signal has trended downwards since October following negative price movements in the NEO token.

It currently may be approaching an oversold region and another short period of more negative price speculation or increased fundamental pressure may push the NVT signal to a new oversold point. Once this point is hit upward pressure should be put on NEO and the token may have momentum for a forward price run.

Drivers of new onchain volume in the coming year should be developer activity for the platform and ICO launches. A 2018 summary from the NEO team optimistically titled ‘The Darkest Hour is Just Before the Dawn‘ describes bubbling dev communities such as long time partner ‘City of Zion’ and Chinese team NEL, operating strongly despite the crypto bear market.

The teams have continued to push forward creating software development kits and infrastructure tools designed to make building on NEO more straightforward, and have long term horizons for their operations.

There is also some excitement in social circles surrounding a new game launched on the network called Neo.girl.The simulation game lets users interact with a virtual girl named Luna, (built by a mad scientist) who can eat, exercise and do anything ‘humans can do’.

Users interact with Luna to build a friendship and use NEO tokens to buy her gifts and outfits. The game has is mobile based, with some VR elements. It is likely to have some crossover appeal/curiosity given the nature of the demographics participating in the crypto ecosystem .

NEO grill

NEO PMR signal

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, and by comparing it to price, can provide a useful tool to assess whether a token is over or undervalued.

It is also a more straightforward metric to implement versus 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.

This makes it a relatively transparent metric as compared to onchain volume. However, there may be a question of the granularity of the data, and who controls these addresses.

NEO’s PMR signal ranged between between 2 and 4 log points in 2018. Following the network’s initial launch in late 2016 there was a significant period of erratic user activity and fluctuating PMR, which has since stabilized. This indicates that there may be a core of faithful active users tied to the network.

NEO’s current PMR is middling and does not appear to be pushing towards either the historically indicated over or undersold levels. Meaning in the short run, user activity may not put any immediate pressure towards moving token value.

Based on an objective fundamental assessment, user activity is currently ‘correctly’ valued. Over the last year the average number of daily active addresses on the NEO blockchain has been stable at ~8589..

Factors such as growing developer infrastructure and increased complexity of Onchain dapps.

assigned to Onchain volume may affect the growth of active users on the NEO network. Other factors may be improved liquidity for the network’s token driven by new exchange listings and pairs. Currently, NEO volume is driven by crypto-to-crypto USDT, BTC and ETH pairs on mega exchanges like Binance. The addition of fiat on-ramps tied to the US dollar could be a driver of new organic user activity this year and is something to watch for as exchanges like Coinbase and Gemini expand their trading pairs to include more alt-coins.


Technical analysis

Regression Channel and Long Term Trends

On the 1D chart, the death cross, using the 50 and 200 day EMAs, persists, and the 50 day EMA (red line) has acted as resistance around the $9 level. Recently, price has pierced through this resistance level, which may bode well for price in the near term if it can hold these gains, i.e. turn previous resistance into support.


Since the beginning of 2018, the price of NEO has been contained within a negative linear price trend with a Pearson’s R Correlation between time and price of ~0.91 (not shown). Despite periodic price recoveries (black arrows), which have typically coincided with oversold levels on RSI, price has consistently drifted lower.


Additionally, the volume flow indicator (VFI) has consistently remained beneath 0 since mid-May (black arrow), which visualizes the persistent lack of buying volume for NEO. The VFI interpretation is a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.


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 mixed; price is touching the Cloud, Cloud is bearish, the TK cross is bullish, and the Lagging Span is beneath the Cloud and above price.

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.

NEO is currently sitting at $9.23 and attempting a Kumo breakout. Price has bounced from its December 15, 2018 lows around $5.50 to breach the Senkou A resistance. This strong rally in prices and momentary entrance of the Cloud is very positive for price. However, the RSI is currently at 64, which is only 6 points away from entering overbought territory. This dynamic may mean that price will fail to execute a Kumo breakout on this attempt. In the probable event of a Kumo breakout failure, price will likely retest the Kijun support level of $7.50. If that breaks, $6, $5.50, $5, and $4.50 are the next support levels. In the unlikely event of a Kumo breakout, upside targets are $10 and $11.66.


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

The odds of a successful Kumo breakout are far smaller using slower settings with price needing to break and hold above $15.42 (flat Senkou B). The resulting upside price targets would be $18.40 and $20. Currently, the Senkou A is acting as resistance at $9.50.



In terms of valuation and sentiment, 2018 was a challenging year for the NEO network, with the blockchain’s underlying token falling 96% in under 12 months.

However, it is important to consider that alt-coin markets are dominated by retail traders who are more emotional and anxious than their institutional counterparts. This likely means that NEO was priced too highly in the bull market and has been sold too heavily in the ongoing bear market — based on both speculative and fundamental factors.

Like many other token projects following a long period of consolidation, 2019 presents new opportunities. If new technology updates on the NEO blockchain makes Dapps and ICO offerings appealing to the market, then the NEO tokens utility will broaden and it may be primed to reemerge as a leading a platform chain in the next bull market.

The long term technicals for NEO are firmly bearish, despite experiencing period price bounces from oversold levels; including the most recent bounce from $5.50 to $9.23 after December 15, 2018. Given the current bounce, price is currently trying to enter the Cloud. However, given its current RSI metrics, a successful breakout is unlikely.

Both, the prudent short term trader (10/30/60/30) and longer term trader (20/60/120/30), on the 1D chart, will await a positive TK cross and Kumo breakout above $11.66 and $15.42, respectively, before entering a long position. Both trader’s support levels are $7.50, $6, $5.50, $5, and $4.50. In the unlikely event of a breakout, the (10/30/60/30) trader’s price targets are $10 and $11.66 and the (20/60/120/30) price targets are $18.40 and $20.


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