Santiment Analytics: Defi loan as the key to the precise analysis of crypto market cycles
<p> <strong> Santiment Analytics: Defi loan as the key to the precise analysis of crypto market cycles </strong> </p>
Defi credit and market cycles: analyzes from Santiment
The Santiment Analytics platform has found that loans and credit metrics in the defi area can give investors valuable insights into the crypto market states. By examining interest rates, debts and liquidation events, this data enables better analysis of overheated markets and possible market returns.
The importance of interest rates for market analysis
According to Santiment, interest rates often show when borrowing over 10% to 15% that the market is overheated by excessive demand for leverage. This condition can indicate speculative market development. In contrast, low interest rates can indicate a market low over several weeks in which speculation have decreased.
The platform argues that credit and credit and credit dates can give a deeper insight into the market conditions, beyond what price actions or the general market mood show. This is particularly important because the metrics can make the extreme points of the market clear - both times of overheating in which caution is required, as well as cooling phases that signal buying opportunities.
value of money and its influence on the cryptoma markets
Santiment emphasizes the concept of the "value of the money", which reflects the interest rates of credit platforms such as AAVE and compound. Ascending interest rates during an increase in loans indicate that investors are willing to cover high costs to get leverage. In contrast, falling interest rates signal decreasing demand and possible market calm.
A crucial indicator of a market reversal is, according to Santiment, sudden climbs of interest rates at the basic level. A stable period of 2-4 weeks with flat interest rates can indicate that the market has made a cyclical turn.
liquidation metrics as analysis tool
The company introduces a liquidation metric with the name "Blood on the streets", which is intended to help investors identify potential market cycles. Liquidations typically occur when the security value of loans falls below certain threshold values, which often leads to massive sales pressure.
Incoming analyzes show that high liquidation peaks in combination with a decline in total debt can indicate possible market floor pictures. Mainly note the total liquidations that map the dollar value of the compulsively closed positions, as well as the fluctuations in the entire debt. Refunds of borrowers who represent voluntary debt reduction can also be indicators of upcoming market movements.
According to Santiment, many liquidations come from long positions when market participants borrow stable coins to acquire more crypto. In contrast, liquidations from short positions can often be observed in market increases.