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07 Februar 2019

Crypto Broker Weekly Rotation Report CW 06

Patrick Mehrhoff

Patrick Mehrhoff

Marketing und Kommunikation bei Crypto Finance AG

Über den Autor

This is our Crypto Broker Weekly Rotation Report, directly from the Crypto Broker trading floor to provide extensive insights into the crypto asset market, including quantitative data analysis, macro market comments, technical chart analysis, and rotation (sector) analysis. All in all, this gives a good overview of different practices to help you evaluate different market sectors. A PDF version of the report can be found at the bottom of this page.

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Contents

1 Rotation Analysis

2 Market Analysis

3 Top Ten Comparison

4 Volatility and Correlation Comparison

5 ETHBTC 4h Technical Chart Analysis

6 Market Cap Overview

Glossary

1 Rotation Analysis

Tron (TRX) and BNB are in the spotlight. Tron has been the altcoin darling for quiet some time now. Even though this coin is very volatile, it has shown a nice upward trend since the begining of the year. The last spike to the upside was not driven by fundamentals, but by a derivatives trader on Bitmex that ran into a liquidation of 100 million in TRX contracts, which is worth roughly 2.5 million USD.

Volatility is still grinding lower on most of the coins. Worth mentioning is that BTCUSD 3-month ATM volatility has slowed down with its decreasing trend. Additionally, we are approaching a lower volatility, last seen in November 2018 before the big sell off.

In our correlation table (Table 2), we see a further spread in the numbers. TRX and BNB are now trading at about a 0 correlation versus BTC. Within the top 5 in theh table, the correlation is what we would call „sticky“ at close to 1. It is also nicely visualised on our graph in Figure 2.

There are no big changes in our last chart (Figure 4). The MACD analysis still indicates overweighted exposure in BTC, but it is losing some steam. This is probably the effect of ranks 2 to 10 where the MACD is bottoming out, but it does not show any signs of upward strength yet. Altcoins ranked 11 to 50 continue their downward trend after last week’s turn. This is additional confirmation that the prevailing trend is continuing is given the advanced decline line (purple). Both ranking sectors are below the 0.5 level and even the unsmoothed line (grey) is below that level.

Therefore, our conclusion remains the same: keep your exposure overweighted in BTC versus the altcoins.

2 Market Analysis

The bright start to the year did not help to overcome the persistent bearish sentiment that looms over the market. In only a few days we are about to officially witness the longest stretch of continuously declining prices in Bitcoin’s 10 year history. This even exceeds the infamous 2013 – 2015 bitcoin bear market, which spanned 410 days from its highest to lowest price. Many of the altcoins have suffered even more, bringing the total market capitalisation near the $100bn mark again. While projects with enough cash from the boom times have used the calmer times to develop and invest, we see the prolonged crypto winter slowly taking its toll on poorly funded or mismanaged projects. One of the most battered projects recently has been NEM (XEM) where the foundation mismanaged its funds as the bear market took hold and nearly went bankrupt. While they claim to have recovered from this point, they may have lost much trust in the community. If they succeed, it may take them a while to recover, which is a pity for such a promising technology.

Many large institutions are still holding to their optimistic crypto outlook, such as the US exchange CBOE that resubmitted its application to list a bitcoin ETF on one of its trading platforms. Kraken’s latest accomplishments may support such product offerings. The US crypto exchange announced the high-profile, pricey acquisition of Crypto Facilities, an established crypto trading platform that is already regulated by the Financial Conduct Authority (FCA). This is the first exchange of this kind, and it will enable Kraken to offer users spot and futures trading. Binance, the world’s largest crypto exchange by volume, announced with its partnership with Simplex, a licenced financial institution offering online fraud-protected payment processing tools. The partnership makes services such as debit and credit card payments in cryptocurrencies available. As such, Binance users can purchase Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), and XRP (XRP) via Visa and MasterCard debit and/or credit cards within 10 – 30 minutes on average. Upcoming block reward adjustments in some of those projects may bring some market activity. LTC will be halving in August of this year and ETH will be reducing its block reward by 33% in February. Block reward reductions are often bullish events. While many market participants claim that such events should be priced into efficient markets, others believe that the events could actually lead to some bullish momentum. Either way jitters will intensify as we approach the halving dates.

3 Top Ten Comparison

Table 1 : Data source: Coinmarketcap; change to last week in parentheses

Table 2: Data source: Coinmarketcap; change to last week in parentheses

4 Volatility and Correlation Comparison

Figure 2: Correlation comparison; Data source: Coinmarketcap

5 ETHBTC 4h Technical Chart Analysis

Figure 3: Data source: Bit1nex; Chartsystem: Tradingview

 

Looks like range trading

ETHBTC is trading in a 6.5 percent wide range. Currently we are sitting right in the middle of that range. The recent lows moved lower to around 0.02980, which we touched twice. The upper band of the range comes in at around 0.03170, which nicely converges with the upper band of the Ichimoku cloud.

The overall trend has not changed, which is clearly displayed by the big red Ichimoku cloud. The market is now consolidating after the fast drop around the end of January. This will give us a clean textbook setup to play.

As the overall trend is down we are looking for trades to shorten the ETHBTC pair or in terms of rotation, move some more altcoins into BTC. But since we are stuck in a range we recommend waiting until there is a breakout to the downside with a daily closing below the recent lows. If the market decides to push the upper end, we would start reducing the BTC exposure versus altcoins but only when a clear breakout to the upside happens. This would also be followed by a daily closing above 0.03170.

ETHBTC chart 4 hours

6 Market Cap Overview

Figure 4: 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.

Source Section 2 Market Analysisvision&

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