Where does SAND currently stand on the risk-reward scale?

Thanks to the recent hype in the metaverse and games, Sandbox (SAND) has become the dominant project of the early days. Shortly after Facebook’s parent company changed its name to Meta on October 28, 2021, SAND saw growth of almost 700 percent in a month and generated huge gains during that period.

However, with the market-wide sell-off, SAND also underwent a significant correction in December 2021 and early January 2022.

But as the space started to recover, SAND also caught up with the upside and broke out of its 50 moving average. From the $3 zone, it is on the verge of reaching the $5 mark and has rallied almost 66% in two weeks. SAND also definitely broke the $4.2 resistance area and right now the token is trading around the $4.8 zone.

However, the $4-$5.5 area has acted as a strong resistance, hence the market needs a big stimulus to break this zone.

Source: TradingView

However, the current situation offers investors a unique opportunity to buy. Even SAND’s on-chain indicators seem to be showing the same thing. Looking at past performance, SAND’s MVRV-Z-Score suggests that it is undervalued and therefore offers an attractive entry point for its price.

 Source: Santiment

Also, the SAND’s NVT ratio seems to be giving a similar buy signal as the MVRV-Z-Score. Looking at its movement relative to price, it can be concluded that the market is reasonably priced. So this is a good opportunity to participate.

Source: Santiment

Additionally, social media dominance for SAND has also increased greatly over the past few days, with exciting news of the ecosystem’s decline.

The project has now been involved in a number of developments over the years, most recently by luxury fashion brand Gucci, which bought an “unknown” amount of virtual land. The good news, coupled with a surge in social media conversation, bodes optimistically for the future of the project.

Dominance rate in social networks | Source: TradingView

However, not everything is rosy. Certain indicators point to some worrying signs to watch out for.

According to Santiment, supply of  held by non-exchange names has declined, while supply from top exchanges has increased by nearly 33%.

This can be a cause for oncern as it suggests tokens are exiting wallets and entering exchanges, most likely with the intention of withdrawing funds.

Tokens held by non-exchanges vs. amount of tokens held by exchanges | Source: Santiment

The DAA divergence has not yet given a major buy signal, although the price has recovered significantly. So, for now, with signals from on-chain indicators, SAND still lacks strength and confidence that the uptrend will continue.

Overall, however, offers a good buying opportunity for investors in the safe direction, since the current scenario has a rather favorable risk/reward ratio. And it can be quite profitable in the short to medium term.

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