26 März 2020

Crypto Broker Rotation Report Week 13

Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

This is our weekly Crypto Broker Rotation Report, directly from the Crypto Broker trading floor, with extensive insights into the crypto asset market, including quantitative data analysis, macro market comments, technical chart analysis, and rotation (sector) analysis. A PDF version of the report can be found at the bottom of this page.

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Contents

1 Rotation Analysis

2 Altcoin Futures Basis Analysis

3 Top Ten Comparison

4 Volatility and Correlation Comparison

5 ETHBTC 4h Technical Chart Analysis

6 Market Capitalisation Overview

Glossary


1 Rotation Analysis

BTC trading range: 1,700 points!

All asset classes remain in a highly volatile scenario, and further turbulence is to be expected. BTC had a trading range of 1,700 points last week, and traded between 5,350 and 7,150. As of today, several stimulus packages have been put in place. E.g., the Federal Reserve Bank, with an overall balance sheet of approximately $ 4.7 trillion, is willing to increase this as a first step with an additional $ 2 trillion. The Federal Reserve Bank and other national banks are adamant about introducing any measure that will support the global economy.

Overall implied volatility has decreased, but remains very high. The derivatives traded volume has again normalised and has been in favour of call options.

In the charts below, you can see the technical analysis for the Alt/Mid/Shit Indices. Attached you will also find our short-term view on support and resistance levels for all three indices:

Alt:   Support   65.00   / Resistance 75.00 / Alt (4h)
Mid:   Support 58.00  /  Resistance 65.00 / Mid (4h)
Shit:  Support  69.50  /  Resistance 78.00 / Shit (4h)

All three indices broke the support line against BTC. Overall, the ALT, MID, and SHIT Indices traded neutral in $ performance, wheres the $ BTC outperformed massively. The FTX exchange will rebalance its index futures on March 27, 2020 from 12pm to 1pm Hong Kong time. This quarterly rebalancing will have an impact on the ALT, MID, and SHIT Indices as follows:

1. ALT Index will be reduced from 7 to 5 constituents. The coins LEO and TRX will become constituents of the MID Index.

2. MID Index will continue with 24 constituents, and will replace 5 coins in total. Besides LEO and TRX, OKB, HT, and ALGO will be added. BTG, BTT, EGT, HC, and OMG will be out.

3. SHIT Index will reduce constituents from 58 to 51. The new coins in this index are BTG, OMG, HBAR, GT, VSYS, BTT, CKB, HC, CHZ, MATIC, TOMO, ARPA, and BEAM. The coins ABT, ARK, BNT, CTXC, CVX, DENT, ENG, FTM, GAS, GRS, GXC, LOOM, NAS, PIVX, POLY, PPT, OKG, STORJ, STRAT, and WTC will be out.

You can find more information on the FTX rebalancing here.

There was some shifting in the sectors last week. Winning sectors were Store of Value, IoT, and Entertainment, whereas Exchange, File Storage, Payment, and Privacy were the losing sectors. The top performing coin was BSV with 40%.

MACDs for BTC look overbought as all other coins ranked between 2 and 50 are oversold.

BTC has shown some decoupling in the short term, and it will be interesting to continue observing this behaviour. The fact is that in a stressed market all asset classes correlate very well.

Figure 1: Sector Rotation

 

2 Altcoin Futures Basis Analysis

It is finally expiry time for the March 2020 contracts. In terms of derivatives contracts, it has been a very volatile first quarter of the year. The BTC future basis saw a trading range of approx. 6%. After trading in contango for most of the year, the situation has turned dramatically, and, currently, we are still in slight backwardation. Right now, BTC June and Sept 2020 future contracts are trading around a neutral zone, with a discount or premium of 0.5% depending on the market situation. BTC perpetual future contracts are trading overnight with a negative funding rate of 0.10%.

ETH future and perpetual contracts are showing similar patterns. Open interest in BTC and ETH options has increased again, whereas the overall trading volume has been stable over the past few days. In general, the BTC and ETH market has experienced a low level of liquidations so far. Many open positions have either already been executed or were closed towards the March 2020 expiry. We have not noticed many rollover transactions into June or September 2020.

Explanation – contango and backwardation are terms used to define the structure of the forward curve. When a market is in contango, the forward price of a futures contract is higher than the spot price. Conversely, when a market is in backwardation, the forward price of the futures contract is lower than the spot price.

Figure 2: Altcoin Futures Basis Overview

 

3 Top Ten Comparison

 

 

4 Volatility and Correlation Comparison

Figure 3: Volatility Comparison; Datasource: Coinmarketcap

 

Figure 4: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 5: Data source: Bitfinex; Chartsystem: Tradingview

 

The steady grind lower continues

As mentioned in our last report, I would have thought that we would see some fresh selling momentum kick in when we took out the 0.020 level. That didn’t happen. In fact, we seem to be finding quite some support around this level.

Do not get me wrong, the overall picture is still very bearish, but it feels like the sellers are losing steam (not a good time to put in fresh shorts).

At the current levels, my game plan is to take two-thirds of the short position off. And then take the remaining position off when we trade above 0.0215.

 

6 Market Capitalisation Overview

Figure 6: Market capitalisation overview; Data source: Coinmarketcap

 

Glossary

Advance Decline Line – the Advance Decline Line shows the ratio of coins for which the market cap increased relative to the market cap of BTC for each day.
ATH – all time high (maximum lookback period of 730 days).
Data source – tables and charts are based on daily close prices provided by Coinmarketcap.
EWMA – exponentially weighted moving average.
MACD – moving average convergence/divergence is a popular technical indicator to identify trends in the underlying instrument. It consists of the MACD and signal line, and the area shown in the background. The MACD line (strong) is the difference of two exponential moving averages, which are defined by the first and second parameter of the indicator. The signal line (weak) is the exponential moving average of the MACD line defined by the third parameter. The area in the background illustrates the difference between the MACD line and the signal line.
Pearson Correlation – quantifies the linear relationship between two variables.
Spearman Correlation – quantifies the monotonic relationship between two variables. As such, the Spearman Correlation is based on the ranked values of each variable and is used to detect non-linear relationships between the two.

More information about and contact details for Crypto Broker AG are here.

Download the Rotation Report as a PDF here.

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