Injective (INJ) May Be Overvalued, On-Chain Metrics Suggest

In the last week, the price of INJ, the token that powers Injective, has risen by almost 10%. 

While the price rally might indicate a shift in market sentiment from bearish to bullish, a key metric reveals that it has been driven by speculative buying activity.

Injective Traders May Soon Begin Selling For Profit

An assessment of INJ’s Price-Daily Active Address (DAA) Divergence metric suggests that the recent uptick in the altcoin’s value might be short-lived.

This metric compares an asset’s price movements with the changes in its number of daily active addresses. Investors use it to track whether the price movements are supported by corresponding network activity.

At press time, INJ’s Price-DAA Divergence is 154.52%. This suggests that the coin’s price has risen significantly compared to the growth in its daily active addresses. There is a 154.52% difference between the altcoin’s price and the change in daily active addresses.

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Injective Price DAA Divergence. Source: Santiment

When this metric spikes like this, it suggests that the asset’s price has risen without a corresponding increase in network activity. It signals that the price rally may have been driven by speculative buying or potential overvaluation.

At this point, traders are known to begin profit-taking.

INJ’s Market Value to Realized Value (MVRV) ratio confirmed that the coin may be overvalued. As of this writing, the metric’s value is 128.71%.

Injective Market Value to Realized Value Ratio. Source: Santiment

This metric measures the ratio between an asset’s current market price and the average price at which all its coins or tokens were acquired. 

When its value is above one, the asset’s current market value is significantly higher than the price at which most investors acquire their holdings. It is deemed overvalued, and most traders sell for profit at this level. 

INJ Price Prediction: The Current Uptrend is Not Strong Enough

While its price has managed a 9% uptick in the last week, INJ’s market remains dominated by bears. For example, readings from its Directional Movement Index (DMI) confirm this. 

This indicator measures an asset’s trend strength. At press time, INJ’s negative directional index (red) at 29.40 rests above the positive index (blue) at 19.83.

When an asset’s DMI is set up this way, it is a bearish signal, suggesting that selling pressure outweighs the asset’s demand. 

INJ’s Aroon Up Line is at 0%, suggesting a weak current uptrend. This indicator measures an asset’s trend strength and identifies potential price reversal points. 

Injective Analysis. Source: TradingView

When the Aroon Up line is close to zero, the uptrend is weak, and the most recent high was reached a long time ago.

Once the speculative buying stops, INJ will shed all its gains and trade at $19.67.

Injective Analysis. Source: TradingView

However, if the current trend continues and actual demand for the coin begins to climb, it may rally toward $22.80.