On chain divergence occurs when the price action of a digital asset moves in a different direction compared to its underlying on-chain metrics. For instance, the price might increase while network activity or transaction volumes decline. This discrepancy can signal a potential shift in market trend, suggesting that the current price movement may not be sustainable. It is a key indicator for technical and fundamental analysis.
Context
Crypto news often reports on instances of on chain divergence, using these observations to forecast potential market corrections or reversals. Analysts examine metrics like active addresses, transaction counts, and miner revenue against price movements to identify these disparities. Such divergences prompt closer scrutiny of market health and underlying participant behavior.
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