ADVERTISEMENT
Advertise with BNC

WAVES Price Analysis: A slow start to 2019

With its price underperforming compared to the rest of the altcoin market, WAVES has not had a great 2019 so far. Technicals remain bearish, although recent and upcoming network updates may offer a boost to the token’s sluggish performance.

Waves (WAVES) is a public cryptographic network characterized by a simple, streamlined user experience delivering a comprehensive blockchain solution. It offers its users smart contract functionality for complex token transfers, token creation and issuance services, and an in-built decentralized exchange (DEX) that comes packaged with fiat gateways and atomic swaps. All of these features are accessible through the Waves client which acts as the primary wallet solution for the native WAVES token.

The WAVES token currently trades at ~USD 2.66, down ~1% in the last week and ~3% in the last month, and sits at 29th position on the Brave New Coin market cap table. It has not experienced the same positive momentum that a number of other altcoins have during the last quarter.

The blockchain is built with a unique Waves-NG ‘liquid block’ blockchain that blends Proof-of-Work and Proof-of-Stake, breaking up the chain between ‘key’ and ‘micro’ blocks. It also has a leased proof-of-stake mechanism that allows users to assign their token to a large miner who mines on their behalf, giving them access to passive rewards, without the need to sacrifice a large amount of processing power.

The initial value and appeal of the platform, (and its comparison to Ethereum), was derived from the Waves Custom Application Token (CAT) process. This allows any user to create a custom token using the easy-to-navigate Waves Lite client which can run as a desktop or mobile app. There are currently 26236 custom tokens created on Waves, with 19 new tokens created on 23/04/2019. Tokens created on Waves lack the functionality of tokens created using the popular Ethereum ERC20 standard but nonetheless the Waves CAT format is favoured by some issuers because of the speed and ease of issuance. In order to issue a token, a creator needs to pay a small fee in WAVES.

The Waves CAT format is set to change with the launch of new ‘Smart Asset’ protocols for Waves tokens. The new features are based on scripts that can be added to issued tokens which have to go through extra confirmations when transactions of the token have to be verified on the Waves blockchain. For example, an issuer can add scripts to a smart asset that blacklists or whitelists specific blockchain addresses. It is likely that new scripts (features) will be created as more developers experiment with the protocol.

FA1

The current top 15 Waves tokens by market cap. Notable Waves issued tokens include Tokes (TKS) and MobileGO(MGO). Source: http://dev.pywaves.org/

Waves CAT tokens, once created, are immediately tradable on the platform’s internal DEX (decentralized exchange). The DEX has several popular, if idiosyncratic features.

The Waves DEX is semi-centralized and uses matcher nodes to match trader orders before settlement on the Waves blockchain layer. This gives it speed and transaction fee advantages over a number of current Ethereum solutions. However, with scalable layer 2 DEX infrastructure being built for Ethereum, and new DPoS DEX solutions arriving for networks like Binance Chain and EOS, this market advantage may not last.

The Waves DEX offers fiat gateway solutions and non-Waves based token trading via Atomic swaps. The DEX has a clean UI that is comparable in features to some centralized exchanges.

The native token of the Wave blockchain, WAVES, is used to pay out nodes for their services in verifying transactions. Tokens are used for staking, and for allocating stake to mining pools as part of the network’s PoS mechanism. WAVES acts as the most common base for trading pairs on the Waves DEX creating utility as a liquidity tool for trading. WAVES also acts as a membership token within the Waves ecosystem. Holding the tokens gives the user access to exclusive airdrops, games, and Dapps, hosted as smart contracts on top of the network.

WAVES can also be used to make payments and peer-to-peer transfers between blockchain wallets, giving it core functionality as a cryptocurrency similar to Bitcoin and Monero.

However, the most relevant use-case for WAVES may be as a medium to make speculative bets based on market signals, the changing public perception of the Waves network, and events like the Vostok ICO in order to make a profit trading on crypto exchanges such as Binance, Bittrex or Bitfinex.

WAVES has a fixed total supply of coins set at 100 million, with no inflation. During the WAVES ICO 1 million tokens were set aside for early supporters, 1 million for post ICO bounties, 4 million tokens for strategic partners and backers, and 9 million tokens were reserved for the development team. If these tokens are still held by the respective parties, this suggests a possible circulating supply of 85 million WAVES. The Waves ICO raised 30,000 BTC in 2016 – worth around $16 million at the time. From an ICO price of ~$0.19, WAVES is currently up ~1,300, but is down ~85% from its all-time-high of $18.07 achieved on December 19th 2017.

Travis Kling, Chief Investment Officer of Ikigai Capital said, “Owning Ethereum today is a call option on what you think the network is going to be in the future.” Similarly, while most WAVES buyers are likely looking for short term profit opportunities, some are buying WAVES with the expectation of future use cases as the blockchain develops.

FA2

Waves blockchain transactions in the last month. Dominated by basic transfers and DEX operations. Source: http://dev.pywaves.org/

WAVES recently redefined its token issuance smart contract model, and its user account model to include features like multi-signature locking and oracle functionality, and has launched a new blockchain programming language called RIDE. These new features will give developers the ability to create more elaborate Dapps.

The Waves ‘Smart account’ model system is a much anticipated feature of the new Waves blockchain. Smart accounts are accounts with an attached transaction checking script that applies rules to outgoing transactions based on factors like multi-signature requirements, proofs, escrow requirements and current blockchain height. Smart accounts power the Waves ‘Smart Asset’ protocol.

Waves smart accounts function similarly to Ethereum smart contracts, however, they are not GAS based and operate with set, deterministic fees.

Script costs are preset, and based on complexity units which max out at a 100 units, with scripts not capable of being larger than 8kb. The fixed cost of adding a script is 400000 wavelets (Waves coins, 100000000 wavelets = 1 Wave). For example, if a transaction’s usual cost is 0.001 WAVES, adding a base level smart account script feature to exactly the same transaction will cost 0.001 + 0.004 WAVES.

The Waves blockchain and WAVES token continues to mature and develop value propositions. In the short term buyers and sellers are likely to focus on the project’s ongoing multi-use case model. This suggests the possibility of continued price volatility, with ‘waves’ of retail buying interest around the dates of network updates and WAVES-centric events such as airdrops.

The Waves platform uses the idiosyncratic WAVES-ng protocol. The core mechanism of the consensus is to allow multiple blocks on the Waves transaction chain to be verified at the same time, theoretically resulting in increased transaction speeds.

With WAVES-ng, sequences of blocks are broken up into sections called Epochs, each epoch has a leader block from which other blocks are derived, in parallel. For example, a leader can have two unique batches of two blocks attached to it, each having the unique reference of the original leader block public key.

The key block is generated by a proof-of-stake miner and does not contain transactions, but a public key. This is used to reference subsequent microblocks that do contain transactions.

The Waves-ng protocol extends the concept of the Bitcoin-ng model by letting miners extend the size of blocks by allowing them to be ‘liquid’ and keep growing until the next key block appears.

The proof-of-stake miner who creates the key block issues microblocks, and does so relatively easily. The key blocks contain no transaction data and are therefore very small, meaning they can keep being produced at a relatively low processing power cost to the proof-of-stake miner, who then issues microblocks, easily issued by signing them with a private key which references the public key of the original keyblock.

The microblock is then sent to the network, miners on the network compete to solve its problem, block production assignment of the microblocks is dependent on stake, with miners owning a higher stake of WAVES more likely to be assigned a block to be published. 60% of the reward goes to the refererer, while 40% goes to the actual block producer.

The advantage of the WAVES-ng protocol is its fluidity and the ability of key block miners to facilitate multiple blocks being published by multiple producers. The WAVES-NG blockchain launched in December 2017. Based on testnet data, it was proposed that the Waves network was capable of handling a volume of 100 txps.

It appears, however, that the network has not had to manage this sort of transaction volume in recent times. In 2018 the network’s busiest day was the 28th of March, when it handled 167714 transactions in 24 hours or ~1.94 transactions per second. We are yet to see how the network performs at scale, and if nodes will be capable of handling a potential network bottleneck.

There also appears to be the possibility of a feudal-style mining system materializing on WAVES-ng, given the nature of proof-of-stake, which favours resource heavy miners within the network, who can purchase a sizable stake and weight mining rewards in their favour.

At present, the top six miners on the Waves blockchain, control over 66% of the network mining activity. This appears somewhat skewed, given that there are ~87 nodes operating in the network. This is a smaller group of nodes controlling hashpower to a blockchain that is less decentralized, and therefore less censorship resistant and immutable. This could lead to political issues and cause potential miners to opt out of the network, given the reward odds are skewed against them and towards the richest in the network.

However, because Waves uses Leased Proof-Of-Stake functionality, any user on the blockchain can lease their full balance of WAVES to a Proof-Of-Stake miner or mining pool and earn rewards passively, without setting up node infrastructure, in proportion to the size of their allocation. There is a hand over of fiduciary responsibility from user to mining pool, but pools are still accountable for their ‘work’ on the blockchains, because users always have the option to switch staking pools.

There are currently 204 pools to choose from for users, 18754 stakeholders, ~46,704,756 leased WAVES tokens, and a total of ~67,755,447 WAVES set aside for PoS. This suggests that a significant portion of the 100,000,000 WAVES supply is being used for the easy to access Wave leased-PoS rewards.

A medium term driver of positive price momentum has been the VST airdrops. The Vostok project, a major blockchain initiative designed to help governments and enterprises decentralize IT systems, announced that it would be launching the platform’s VST token (Vostok System Tokens) over the Waves blockchain. Additionally, 3% of VST’s total supply will be airdropped to WAVES holders through the Waves internal client.

The Vostok announcement has created buzz and positive momentum for a few reasons. The project raised $120 million through private and institutional investors, a validation of the scale and reach of the project. Vostok has also clarified, that legal conditions withstanding, the entire public sale will be held exclusively for WAVES holders.

The Waves platform has also earned mainstream recognition through a partnership with international audit giant Deloitte, to help provide a compliant legal framework for ICO projects choosing to launch on WAVES. It is likely the partnership was designed with deals like the Vostok launch in mind.

The initial Vostok announcement on December 17th had an immediate impact on price. In the 48 hours that followed, the price of WAVES rose over 60%, from ~$2.5 to just over $4.

There was another Vostok pump on the 17th of January when following the release of details on how to participate in the VST public airdrop, the price of WAVES rose ~20% over a week.

The VST token is expected to launch with full platform and for trading in Q3 2019, and the lead up to this event seems likely to create further speculative trading activity based on historical signals.

Waves launched an update to its client on April 15th. This adjusts charting features and fixes some minor bugs. It also announced a new set of grants for Dapp builders on April 9th for developers seeking to build applications on the Waves platform using the new RIDE blockchain language.

Onchain assessments

NVT signal

Derived from the NVT (Network Value to Transactions) ratio, 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.

FA3

The short term NVT signal for WAVES leans strongly bearish. It is currently well above 350 points and has crossed into what can be considered an oversold level. WAVES price has been hovering at a range between $2.5-3 for the last 90 days, the rising NVT signal suggests that this position is precarious.

NVTS implies price is currently being held upwards by external factors like positive market conditions and pure speculation, not by onchain transaction activity like users making WAVES transactions on the Waves DEX or smart account/smart asset transfers.

Onchain activity is more likely to represent real demand and true fundamentals for the WAVES token and Waves platform. Without fundamental support, a short term downturn in crypto markets may affect the price of WAVES more adversely than usual because Onchain volume and fundamental value is currently at a historical low vs external token value.

There was a period in Q4 2018, when the NVT signal of WAVES fell well below 50 points, and this coincided with a period of strong price performance.

FA4

FA5

Source: http://dev.pywaves.org/txs/

Around the time of the fall in NVT signal, which means that there was a rise in the onchain volume of WAVES against the external token value, there was a large increase in the number of Mass transfers (highlighted) made on the Waves blockchain. A Mass transfer lets a user make a payment to as many as 100 recipients, implying that it would be useful for moving a large volume of tokens when making an enterprise payment or for an Airdrop.

It is unclear what drove the sudden rise in Mass transfers in late 2018, or why there are far fewer being made in April 2019, but the sudden drop in these transactions appears to have adversely affected fundamental assessments of WAVES and NVT signal evaluations.

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.

However, there may be a question of the granularity of the data, and who controls these addresses. The Waves network is known for hosting numerous Airdrops and there is a possibility that single users creating multiple addresses to maximize airdrop allocations may inflate the Metcalfe’s Law numbers.

FA6

The PMR for WAVES, similar to NVT signal, sends bearish signals. It has continuously touched new highs for 2019 over the last few months and this suggests that any price support that might come from active address growth, or a potential network effect is currently missing.

In 2018, The PMR for WAVES was as low as -3, and this bottom also coincided with a sharp uptick in price. This considered, a sharp drop of the WAVES PMR signal towards a level close to 0 may be a bullish flag.

Social metrics

The @wavesplatformTwitter account has 140,054 followers and is ranked as the 52,866 largest account on Twitter, averaging 82 retweets and 166 likes per post.

Fa7

Follower growth has slowed in recent months following sharp pickups during the most recent major price bull in late 2017 / early 2018. Growth has slowed considerably during the bear months and the account had a net loss in followers between September to December 2018.

There has been a steady increase in tweets per month from the account since the start of 2019. This reflects the return of some bullish momentum to the crypto markets.

FA8

Waves platform CEO and founder, Sasha Ivanov is very active and well followed on social media. His account @Sasha35625 currently has 107,377 followers and is the 67,883rd most popular account on twitter. The account provides useful updates on the current state of Waves and ongoing development progress.

Exchanges and trading pairs

FA9

The most popular trading option for WAVES is BTC and the pair handles over 66% of daily trading volume. The second most popular market is the WAVES/ETH pair and together the top two pairs make up over 82% of daily trading volume. The ETH pair appears to trade at a significant premium to the rest of the market. Fiat transactions with WAVES are also available in Turkish Lira, US dollar and Korean Won fiat options. The USD value of daily volume of the entire WAVES market is ~USD 5.2 million.

FA10

BTC Markets dominate the WAVES trading ecosystem. The WAVES/BTC pair with the most volume is on Binance. WAVES is also tradeable on visible and trusted exchanges such as Bittrex.

Technical Analysis

Moving Averages and Price Momentum

On the 1D chart, WAVES has followed a negative linear price trend with a Pearson’s R correlation between time and price of ~0.70 (not shown), which resulted in a death cross back in March 2018. However, since January 28, 2019, a golden cross occurred and persists; albeit tepidly. Unfortunately, both 50 and 200 day EMA are currently acting as resistance, near $2.63, which has put another death cross within sight.

TA1

Additionally, on the 1D chart, since late-January 2019, price volatility and volume have been demonstrably reduced. This demand reduction has left price bouncing back and forth between the 0.5 and 0.618 Fibonacci retracement levels of $3.06 and $2.56, respectively. If buying volume remains diminished, coupled with a fresh death cross, the odds of a negative breakout increase markedly, which would see price fall back towards $1.85.

TA2

Lastly, on the 1D chart, the volume flow indicator (VFI) is currently nosediving towards 0, which is bearish for price. Only if VFI can bounce off 0 with strong volume, would that increase the odds of a positive price breakout from its current low volatility period, e.g. bollinger bands.

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 touching price and below 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 Kumo breakouts in mid-December 2018 and early-April 2019, but failed to maintain both of them. Currently, price is beneath the Cloud, which has thinned during the recent low volatility period. If buying volume does increase for WAVES, a new Kumo breakout would be relatively easy given the breadth of the existing Cloud and RSI metric of 40. If a breakout occurs, price targets are $3.04 and $3.50. If a negative breakout ensues, as described above, support levels are $2.50, $2.25, and $2.00.

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 bearish: price is below the Cloud, Cloud is bearish, the TK cross is bearish, and the Lagging Span is below 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 $3.08 for a new Kumo breakout. Price targets would include $3.50 and $3.93.

TA5

Conclusion

Following a strong finish to 2018, the price of the WAVES token has stagnated over the last 90 days. Network activity also appears to have dried up over this time period. This is generating strong bearish onchain indicator signals (NVTS and PMR).

Like many other projects in the space, the Waves platform is going through a period of significant technological updating. Once implemented these may re-define the value proposition of the WAVES token.

The new Smart account and asset model adds significant functionality to the legacy Waves transaction model, while the soon to launch Dapp building systems could set the stage for renewed interest in the platform. Updated price discovery around these new features may drive increased price momentum in the medium term, and the rest of 2019.

The technical indicators for WAVES favor the bears currently. 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 $2.85 and $3.08, respectively, before entering a long position. A successful Kumo breakout will yield price targets of $3.00, $3.50, and $3.93, while a negative breakout will highlight support levels of $2.50, $2.25, and $2.00.


ADVERTISE WITH BRAVE NEW COIN

BNC AdvertisingPlanning your 2024 crypto-media spend? Brave New Coin’s combined website, podcast, newsletters and YouTube channel deliver over 500,000 brand impressions a month to engaged crypto fans worldwide.
Don’t miss out – Find out more today


ADVERTISEMENT
Advertise with BNC
ADVERTISEMENT
Advertise with BNC
BNC Newsletters: A weekly digest of the most important news and analysis.
ADVERTISEMENT
Advertise with BNC
Submit an event on bravenewcoin.com
Latest Insights More
ADVERTISEMENT
Advertise with BNC