- I am not a registered investment, legal, or tax adviser or a broker/dealer, and all opinions expressed by me are from my research for educational purposes only.
- Past performance presented here is not an indicator of future performance.
- This post expresses my own opinion about the cryptocurrency mentioned herein and is not an offer to buy or sell, or a solicitation of any offer to buy or sell the cryptocurrency mentioned in this post.
- I do hold a long position in INJ as a token holder.
1. What is Injective Protocol?
Injective Protocol is a decentralized cross-chain derivatives trading platform that is also hosted on a decentralized peer-to-peer network (i.e. InterPlanetary File System) as opposed to most of the DeFi platforms out there which are hosted on centralized servers like AWS, Azure or GCP, hence, making it more censorship resistance. Injective Protocol is built with Ethermint and implemented as a Cosmos SDK module. All operations that are happening on Injective Protocol are recorded and validated via Cosmos Tendermint-based Proof-of-Stake protocol.
Problems with DEX that Injective Protocol Is Solving
Decentralized Exchanges (DEX) which were traditionally built on Ethereum main net that are usually slow in confirmation and suffer high gas fees whenever the traffic is congested, making them not suitable for intraday trading, which resulted in many users still resorting to centralized exchanges like Coinbase, Binance, KuCoin and FTX among others to conduct their trading activities. Injective Protocol is solving this problem by allowing digital assets from several other blockchains to be bridged to their layer-2 injective chain which offers lightning-fast execution speed and zero gas fees.
Front running is also a big problem in most DEX as Ethereum miners are able to arbitrage internally by re-ordering the transactions within the blocks that they produce, but Injective Protocol solves this issue by utilizing Verifiable Delay Function (VDF) to prevent front-running.
Product Offering and Unique Features that Can Be Found Only On Injective Protocol
Unlike other Automated Market Making protocols like UniSwap and SushiSwap which rely on liquidity pools supplied by different users and maintained via constant product formula , Injective Protocol offers an order book-based system and allows its users to trade on not just spot/ pairs that most DEX provides, but derivatives with leverage capability like perpetual futures, swaps and margin trading which are hardly available in most of the DEX that are currently available.
Injective Protocol Buyback and Burn Mechanisms
In order to ensure that INJ tokens are deflationary and encourage users to stake INJ, the protocol has a buyback and burn mechanism which targets to burn 60% of all exchange fees every week where users could bid for the fees collected (e.g. ETH, WBTC) at a discounted price, but all biddings can only be done using INJ tokens. Bidders who offer the most competitive price would be selected and the INJ tokens paid to acquire these fees would be immediately burnt.
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2. How Injective Performs Relative to Other Cryptos ?
Performance of All Cryptos Under Quantdoge Watchlist in 2021 (Sorted by % Return)
INJ has undergone 68.05% return from USD 4.0432 to USD 6.7944 since 01 Jan 2021. INJ is the 27th best performing crypto assets among others here.
3. How Resilience Injective Is Towards Bitcoin Crash Relative to Other Cryptos ?
Historically, all altcoins are somewhat dependent on Bitcoin price movement and it’s often the case where if Bitcoin falls, most altcoins would follow.
Top 3 Cryptos That Are Most Resilient To Bitcoin Crash During Each of BTC 4 Largest Crashes in 2021
INJ has proven resilience against BTC crash in 2 out of the 4 instances.
During the last 4 BTC market crashes,
When BTC dropped by -13.47 %, INJ returned -33.81 % at 20 May 2021,
When BTC dropped by -13.13 %, INJ returned -16.9 % at 22 January 2021,
When BTC dropped by -12.16 %, INJ returned 2.74 % at 13 May 2021,
When BTC dropped by -11.39 %, INJ returned -15.63 % at 22 June 2021
4. Technical Analysis on Injective
4.1. Volume Weighted Average Price (VWAP)
VWAP is a technical indicator used by a trader to gauge the overall trend of an asset price movement. VWAP line (orange line) represents the volume-weighted average price (average price here is defined as the average of high, low and close prices) while close price line (blue line) represents the price when INJ is closed at the end of every single day.
Whenever blue line (close price) is above orange line (VWAP), it indicates that the asset is gaining momentum and being traded higher than its average price level. This would represent a 'buy' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'sell' opportunity, anticipating that the price of INJ (blue line) to fall to its average level (orange line).
Whenever blue line (close price) is below orange line (VWAP), it indicates that the asset is losing momentum and being traded lower than its average price level. This would represent a 'sell' opportunity for short-term momentum trader whom task is to trade following the trend while a longer term mean-revision trader might take it as a 'buy' opportunity, anticipating that the price of INJ (blue line) to rise to its average level (orange line).
As of 11 Jan 2022, VWAP is suggesting that INJ has lost a significant amount of momentum and it's now trading below its volume-weighted average price even though its momentum has just started to pick up.
4.2. Moving Average Convergence Divergence (MACD)
MACD is often used by trader as a momentum indicator. There are 2 lines that form the above charts, namely MACD (12, 26) lines and Signal(9) line, while the histogram is calculated by subtracting Signal (9) from MACD (12,26). Histogram would fall to the negative territory whenever MACD (12, 26) is trending at a lower level than Signal (9) and rise to the positive territory whenever MACD (12,26) is trending at a higher level than Signal (9).
MACD (12, 26) is computed by subtracting the 26-day exponential moving average (EMA) of INJ closing price from its 12-day EMA.
Signal (9) on the other hand is calculated as the 9-day EMA of MACD (12,26).
As MACD (12, 26) goes higher away from Signal (9), it signifies that INJ is gaining momentum and whenever it goes trends at a lower level than Signal (9),it signifies that INJ is losing momentum.
As of 11 Jan 2022, MACD is suggesting that INJ has lost a significant amount of momentum but its momentum has just started to pick up.
4.3. Bollinger Band
Bollinger band is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. Its chart made up of 4 lines, namely:
- SMA (20) (blue line), which is the 20-day simple moving average price of INJ
- Upper Band (orange line), which is computed by adding 2 standard deviations of INJ on SMA (20)
- Lower Band (red line) , which is computed by subtracting 2 standard deviations of INJ from SMA (20)
- Close (green line), which is the daily closing price of INJ
Whenever close line (green) touches the lower band (red), it indicates that INJ is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever close line (green) touches the upper band (orange), it indicates that INJ is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.
As of 11 Jan 2022, Bollinger Band is suggesting that INJ is now trading at an oversold position.
4.4. Relative Strength Index (RSI)
Just like Bollinger Band, Relative Strength Index is often being used by mean-reversion trader as a gauge to assess how undervalued or overvalued an asset is. There are 2 psychological levels, i.e. 30 and 70 in RSI. Whenever the RSI reaches 30, it indicates that INJ is corrected too much and is being traded at an undervalued level, representing a 'buy' opportunity. On the other hand, whenever RSI reaches 70, it indicates that INJ is gaining too much momentum and is being traded at an overvalued level, thus indicating a 'sell' opportunity.
As of 11 Jan 2022, RSI is suggesting that INJ is now trading at an oversold position.
4.5. Price and Volume Analysis
There is a large buy-in of INJ on Binance Exchange on 10 Dec 2021 which sent INJ price from USD 8.44 to USD 12.98, but many traders have also took profit at the same time by selling INJ at USD 12.98 high on that day, which INJ ended up closing at USD 9.29 on 10 Dec 2021. Since then, INJ has been spiralling down to USD 7.15 as of yesterday's (i.e. 11 Jan 2022) close.
One key thing which we could take note from the chart here is that lesser volume was involved during the recent sell-off running from 27 Dec 2021 to 11 Jan 2022 as compared to the Dec 2021 sell-off running from 25 Nov 2021 to 17 Dec 2021 where INJ has sold from a USD 14.28 high to USD 8.01 low. This could signify that the selling pressure on INJ has subsided and its upside momentum is starting to kick in.
Based on the technical analysis presented above, quantdoge is bullish on INJ, but I could be wrong, hence please make your careful due diligence before making any financial decision.
5. Injective Risk Profile
Based on the 100-day 95% historical Value-at-Risk (VaR) profile of Injective defined above, INJ seems to trade at a similar risk level on 11 Jan 2022 as compared to 10 days before on 01 Jan 2022, with its biggest pullback being seen at - 14.21% on a single day during the last 100 days. However, I could be wrong, hence please make your careful due diligence before making any financial decision.
Looking at the probability distribution chart of INJ on 11 Jan 2022 above, the probability for INJ to remain stagnant (i.e. making 0% return) is relatively much higher now as compared to 02 Jan 2022. Furthermore, its distribution has also became narrower with lower upside and lower downside, signifies that its volatility has started to decrease as its active trading volume decreases (refer to point #4.5 above)
6. Price Simulation for Injective
How did quantdoge simulation perform vs the actual INJ price movement over the last week ?
Over the last 7 days, INJ is trading near the lower 25th percentile of all quantdoge simulations, indicating that INJ is oversold and relatively undervalued.
7. INJ Community Analytics
Number of INJ Followers In The Last 30 Days
In the last 30 days alone, Injective followers have grown 3.10% on Twitter from 95,832 to 98,800 and its subscribers have grown 1.49 % from 4,422 to 4,488 on Reddit.
There are on average 97 new followers daily on Injective Twitter and 2 new subscribers daily on its Reddit.
8. Google Trends Analytics
injective protocol reached its peak in Google Search on 2021-04-25 with a Google Score of 100
Over the last quarter, injective protocol Google Score has increased 21.43 % from 35.0 to 42.5
Over the last 6 months, injective protocol Google Score has increased 18.06 % from 36.0 to 42.5
Over the last month, injective protocol is most saught after on Google from Turkey, followed by France and India. According to C# , India has the highest population of crypto users in the world and another statistics from Statistica (extracted from contxto) shown that Turkey has the highest population share of crypto users. Having high interest from regions with large crypto userbase and growing number of crypto users are bullish to a decentralized cross-chain derivatives exchange like Injective Protocol.
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