TRON (TRX) hinted at a potential bear trend reversal this week, showing signs that the loyalty of TRX believers might finally bear fruit after a challenging last three months. From the 26th to the 29th of July, its price rose from $0.0359 (Index) to 0.0402, a ~12% jump in under four days
While encouraging, these gains have since fallen away, with TRX currently trading at $0.31. Additionally, in the more medium term, the price of TRX has fallen significantly over the last three months. From trading at ~0.091 on May 2nd it has retracted ~65%.
The graph shows the normalized USD price, and volume, of five different TRX trading pairs over the last 90 days. TRX/USDT, TRX/BTC, TRX/ETH, TRX/KRW and TRX/TRY. The orange line represents an Index of the prices, blue is TRX/USDT, yellow is TRX/BTC, green is TRX/ETH, navy is TRX/KRW and TRX/TRY is turquoise. The bar charts represent total trading volume in USD.
The reason behind last week’s price spike can likely be put down to speculation surrounding the release of a previously announced ‘secret project’, and the first launch of TRON’s Virtual Machine (TVM), a virtual operating system that will be used to implement TRON smart contracts.
Details surrounding these two new initiatives were revealed during an official TRON livestream on the 30th of May, but despite some fanfare from core TRON Project followers, the wider crypto market’s response was a general ‘meh’, and the price of TRX fell sharply in the immediate aftermath of the announcements.
Exchanges and trading pairs
The most used trading options for TRX, tend to be crypto-to-crypto with the USDT/TRX, BTC/TRX and ETH/TRX making up over 90% of the current volume in the market. The stablecoin Tether pair is by far the most popular and accounts for over USD 100 million worth of daily volume. The most popular fiat-to-crypto pair is Korean Won/TRX, followed by Turkish Lira/TRX, and there are also on-ramp options for TRX with the US dollar and Indian Rupee.
The most popular exchanges for the TRX/USDT are Okex and Binance, which are respectively the busiest exchanges in the world by 24hr trading volume. Okex, handles ~USD 413 million worth of trading through the USDT/TRX pair. The most popular exchanges for the BTC/TRX pairs are also Okex and Binance. Bitfinex is the most popular exchange for the USD/TRX pair.
The secret’s out: Project Atlas
Speculation abounded that TRON’s ‘secret project’ would be connected to its recently announced, purchase of the BitTorrent filesharing service. This was indeed the case, with the TRON project announcing that it would soon be integrating BitTorrent’s data ecosystem on top of the TRON blockchain. During the livestream, TRON CEO Justin Sun described BitTorrent as the network’s biggest Dapp project.
The primary feature of Project Atlas appears to be TRX based seed rewards for Torrent participants accessing the BitTorrent protocol. Seeding occurs when after a file is downloaded by a user in the ecosystem, the user opts to ‘host’ it, allowing other network users to transfer data between each other without needing a central server.
Currently, the primary rationale for seeders giving up their bandwidth for other users in the network is altruistic/libertarian sentiment. However, with a TRX based reward system, seeders will have a monetary incentive to continue hosting files for longer time periods.
This should extend the length of time of Torrent swarm sizes, allowing files to exist within the ecosystem for longer and provide greater accessibility for more obscure files that would likely disappear quickly without the monetary incentives.
For the TRON network, given the significant usage of BitTorrent as a platform to download and store files, Project Atlas has the potential to create a surge of transaction volumes on the network. If it operates as advertised, then there should be rafts of TRX being consistently sent to the wallets of seeders on the BitTorrent file network, organically creating network activity.
Greater transaction activity is an indicator of a healthy distributed ledger network. The more transactions (data) flowing through a network, the more blocks there are being published on top of user transactions, making them more immutable, censorship resistant, and thereby, more secure.
This outcome certainly seems possible with the TRON/BitTorrent deal, although the nature of the seeder reward system is yet to be revealed, so the effects of the deal on network performance are difficult to predict.
An additional consideration is that as TRON operates using a proof-of-authority consensus algorithm, censorship resistance is already sacrificed because miners are given greater authority over transaction approval than in a proof-of-work model.
In addition, if there is a sudden jump in new transactions, i.e. if Dapps like BitTorrent create heavy user loads, TRON could face coordination challenges.
The nature of the POA consensus model also means there are a limited number of miners handling the TRON blockchain, with Super Representatives who are allocated blocks to mine automatically, in rotation. It is conceivable that if there is suddenly a jump in block production requirements, and these new blocks keep getting allocated to Super Representatives, then TRON will have to decide how to appease other network nodes who are indeterminately allocated fewer rewards. Also, as the Super Representatives are not anonymous, the rest of the network would have identifiable targets to direct their unhappiness towards.
TRON will have to ensure that these governance issues are managed appropriately to avoid the network being paralyzed by power struggles between nodes.
New mainnet, new beginnings
TRON officially launched its fully migrated main network on the 29th of July. Prior to the release many had questioned the ability of TRX to function with stability on its new network.
However, post launch, TRON’s network statistics indicate growing transactions per day, more addresses on the network, growing block sizes and a larger blockchain. Indicating a steadily expanding ecosystem, and proving naysayers wrong who believed the network was all hype.
But while this growth over the last month is admirable, the numbers are dwarfed by competitors. Ethereum for example, has an average block size of 23.849 Kb, ~60 times larger than TRON’s — and on the 29th of July, the TRON blockchain processed 28,208 transactions while Ethereum handled 716,314, nearly 25 times more.
It is obviously still early days for the TRON network. However, before considering TRX as a potential ETH killer (as promoted by Sun), based on stronger scaling solutions or cheaper smart contract execution, it may be prudent to wait till the two networks reach comparable sizes.
One metric where TRX continuously performs well is social media analytics. Twitter crypto swarm analytics, compiles data on “every tweet about a cryptocurrency on Twitter”. When a tweet is found with the corresponding crypto’s logo, the application checks if the keywords ‘Moon’, ‘Hold’ or ‘Pump’ (in multiple ways) are present in the text and saves the results. Based on this criteria, TRX was the highest ranking digital asset on Twitter in the last week.
Unfortunately for TRX, the strong social media support did not translate into positive price movements in the same time period — though backers of the project may see the continued community belief as a positive long term sign.
Exponential Moving Averages (EMA) with Long Term Trends
On the 1D chart, the bullish EMA cross (not shown), or Golden Cross, has not occurred which confirms TRX’s negative linear price trend, with a Pearson’s R Correlation between time and price of 0.93 since early May (regression channel). Price tested the upper 2 standard deviation level (orange arrow) briefly, but has begun to decline back towards the mean recently.
The volume flow indicator (VFI) has consistently remained above 0 since inception, but has begun to form a steep downtrend (black arrow). 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.
Additionally, price volatility for TRX has slowly compressed, visualized by bollinger bands. Volatility compression typically precedes a price breakout, which may lean bullish for TRX given their supposed increase in organic, network utilization.
However, if the aforementioned premise does not hold, then a continuation of the downtrend within the regression channel is likely with a breach of ~$0.03 support level (dashed line), with a commensurate fall towards the mean around ~$0.021.
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 beneath the Cloud and 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.
TRX is currently sitting at ~$0.03 and moving in the opposite direction needed for a Kumo breakout retest. However, the RSI is currently at 38 and approaching oversold territory, which is one positive note for price support. The support levels are $0.03 and $0.021, and $0.013 (dashed lines), while price targets for a successful Kumo breakout are $0.048, $0.058, and $0.07.
The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is below the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is beneath the Cloud and price.
Again, the RSI is currently nearing oversold territory which may provide some price support for a new Kumo breakout attempt. If so, price will need to break and hold above $0.069 (flat Senkou B) for a successful Kumo breakout with resulting price targets of $0.084 and $0.10 (both previous failed resistance levels).
The TRON blockchain has shown fundamental growth in recent times, a positive trend that has nonetheless not been reflected in the downward trajectory of its price since May.
It has successfully launched a main network, and navigated the challenging task of designating nodes based on community voting. This shows that TRON may well be able to competently manage an expanding network and minimize the friction of an ecosystem where the anonymity of miners is sacrificed.
Whether TRON will be successful in its missions of becoming a Dapp hosting solution that can rival Ethereum, and a content storage/sharing platform that can disrupt the legacy online media ecosystem, remains an open question — although the BitTorrent purchase was certainly a bold move.
Overall, technicals for TRX are declaratively bearish despite recent improvements in price, network utilization, and sentiment. Both the prudent short term trader (10/30/60/30) and longer term trader (20/60/120/30) will await a positive TK cross and Kumo breakout above $0.048 and $0.069, respectively, before entering a long position. Both trader’s support levels are $0.03 and $0.021, and $0.013 (very bearish scenario). For a successful, Kumo breakout, the (10/30/60/30) trader’s price targets are $0.058 and $0.07, while the (20/60/120/30) price targets are $0.084 and $0.10.
Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.
About the authors
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins
Aditya Das is Brave New Coin’s in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto