Q109. Is the price of Algorand more closely correlated with the crypto market, and assets such as BTC or ETH, or is it more correlated with network usage such as number of transactions or ALGO transfers?

Introduction

A Blockchain is like the name, a chain of blocks, where each blocks has a Data, a hash and a hash of the previous block. This technology was perfect to create virtual money and it was a success.

Bitcoin was the first succesful blockchain but nowadays there are a lot of blockchains in the market such as ETH, SOL or ALGO for example.

But, are they correlated? the price movement of 1 blockchain can impact in other blockchain?.

This Article will talk about that, in concrete about Algorand, a “new” blockchain which launch in 2019, and the movement of the other blockchain mentioned previously, starting from May 2022 until today, to see if Algorand Reacts as the other blockchains, or depends more on the user usage of Algorand.

Analysis in Cryptomarket

May 2022 is an good month to analyze because a lot of blockchains present a downfall, this was the product of the masive fall of Terra, a blockchain which price reached the lowest valleys making a lot of the currents blockchain in the market lose value.

• Starting in May all blockchains present a uptrend in value at May 4. “Bitcoin (BTC) rose toward $40,000 during the New York trading day. The price rise offset a brief period of selling immediately after the U.S. Federal Reserve raised its policy interest rate  by a half-percentage point, its biggest hike since 2000” Says Coindesk in May 4, 2022.
• From May 5 onwards all the blockchains start falling down in price, like Luna which price drops below $1 in May 12, a hard blow for a lot of people, with loses of 40 billions, considering how well Luna was in April.
• Surprisingly Algo presents an Uptrend from May 6 to May 9 the biggest anomaly if is compared with BTC/ETH/SOL.
• After May 12 the peaks and lows are really similar in all the blockchains, BTC prices tends to affect the rest of blockchains, making the other blockchains resonate with the movement of BTC, when is in downtrend the others blockchain resonate going downtrend sometimes with more impact, and if BTC goes uptrend the others blockchain resonate going uptrend with a less impact.
• Solana blockchain presents a similar trend like Algo, both resonates with the movements of BTC.

Methodology

All the data presented is from Flipside data banks

• Prices will be retrieved from the next tables:
  • WETH: ethereum.core.fact_hourly_token_prices
  • WBTC: ethereum.core.fact_hourly_token_prices
  • ALGO: flipside_prod_db.algorand.prices_swap
  • WSOL: solana.core.fact_swaps
    • with solana.core.dim_labels for labeling.
• For ALGO transfers volume and activity:
  • flipside_prod_db.algorand.transfers
• For ALGO application calls:
  • flipside_prod_db.algorand.application_call_transaction
• All the Queries are made by my friend (NebyChiquito) and Solana is made from (Pinehearst). this is my first intermediate submit, starting seriously in flipside in the past week, but i’ll provide my own analysis in the present Article.

Analysis in Algorand Activity

• Algorand Blockchain has a lot of projects that goes from play-to-earn, to NFT in music or partnerships with influential corporations like FIFA in May 4.
• After announcing the partnership with fifa Algo prices rose and that can be one of the reason of why Algorand price goes in uptrend in contrast of the cryptomarket from May 6 to May 9.
• The activity peaks on May 12 that because of the Luna crash, a lot of people may be swapping in these days and reacting to the massive drop on all blockchains.
• After that is possible to see peaks of activity when Algo price goes in downtrend.

Summary

• Algorand Price seems to be correlated with the cryptomarket.
• Algorand big announcements like the FIFA partnership, may be the factor to break this correlation with the cryptomarket.
• Algorand User activity seems to be the consequence of Algo prices drops.
• Like Algorand, Solana blockchain seems to be correlated with the cryptomarket.