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16 Mai 2019

Crypto Broker Weekly Rotation Report CW 20

Patrick Heusser

Patrick Heusser

Senior Trader bei Crypto Broker AG

Über den Autor

This is our Crypto Broker Weekly 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 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

The tide is shifting in the altcoin space.

A wave of green price action is flickering across the screens of altcoin traders. We saw a sharp turnaround over the past 48 hours. With some altcoins showing performance of more than 100 percent in that time period. We gave you a sneak peek yesterday of our main indicators and they looked bullish on altcoins.

Starting with the performance visible on (Table 1), we see a positive performance for almost every coin. Volatility has also picked up and we are now above 50 percent (60 day, annualised) for every coin.

The correlation (Table 2) tightened just a little bit, but this makes sense given the aggressive price spike. Nevertheless, we would like to see correlation stay wide or even widen further. We think that this would add to a sustainable longer term bull run.

The MACD charts (Figure 4) show a clear picture. The bitcoin dominance has come down from its peak since the beginning of the year, and the ranks 2-10 are the main beneficiaries. The lower ranked coins showed some signs, but probably need some more time as they were bashed down pretty hard over the past couple of months. What is really impressive are the figures of the advanced decline line charts. The unsmoothed line almost hit 1.0, which indicates that every asset in that ranking had a positive performance against bitcoin. In order to call it a sustainable trend change, however, we would like to see the smoothed line (purple) move toward the 0.5 level – even better would be for it to move above it.

We are switching to neutral with a bias to go long altcoins versus bitcoin. Two factors that we are keeping a close eye on, as they will trigger an overweight position in altcoins, are ETHBTC pushing through the resistance of 0.033000, and the smoothed advanced decline line also needs to be closer to 0.5. Additionally, we are watching the derivatives market for altcoins. The basis is especially a further indicator for us. If the basis moves further into contango (future prices above spot) that will be a sign that leveraged money is flowing into altcoins.

We post regular updates about the altcoin futures basis. We post regular updates on Twitter about most of the indicators: you can follow these on Twitter (@heussepa).

 

2 Market Analysis

The past few days have definitely been exceptional and exceeded most of our expectations. Bitcoin surged more than $2,000 since last weekend to ultimately also cross the $8,000 hurdle – a level we had not seen yet this year. The sharp rebound after last month’s set-back amongst issues around Bitfinex and Tether is certainly a good sign of the current state of the market. Also, last week’s Binance hack was shrugged off with ease. Daily volumes surged to record highs and the bitcoin market cap alone increased to $140 billion, which is more than the entire market was worth a couple of months ago. The positive momentum is coming at a time when global financial markets have a hard time keeping up the momentum. The Fed paused its tightening, the U.S. – China trade war talks recently escalated, and the correlation among assets on down-moves started to increase, which indicates that investors are looking to off-load risk. Do we see a flight into the digital world? Well … it is hard to say. Many also attribute the bullish momentum to the 2019 Consensus Conference in New York, which is currently taking place and would indicate the risk of a „sell the fact“ should the content delivered at the conference not be able to match expectations. Some profit taking after the latest run would not surprise, but rather than losing faith in the market we would like to take the opportunity to accumulate, as the outlook for 2019 keeps improving.

Improving institutional offerings from institutions, such as Fidelity, Bakkt, and several other financial heavyweights will no doubt continue to add momentum and contribute to the necessary money inflows. Bakkt has actually released a statement saying that they are ready to launch their long awaited physically-backed futures contract in June. Germany’s No. 2 stock exchange, Börse Stuttgart, revealed that it will enable the listing of crypto-linked Exchange Traded Notes (ETNs). Other firms continue to build their infrastructure around the Blockchain technology. Microsoft is launching the first decentralised infrastructure that is built directly on the Bitcoin blockchain. The project, called Ion, deals with the underlying mechanics of how networks talk to each other. Also, Switzerland’s national postal service is cooperating with blockchain firm Modum to further develop sophisticated monitoring solutions for shipment.

 

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 1: Volatility comparison; Data source: Coinmarketcap

 

Figure 2: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 3: Data source: Bitfinex; Chartsystem: Tradingview

When things snap – they snap hard and fast!

The ETHBTC pair experienced a massive spike to the upside after we hit a low of 0.024500. This is +34.5 percent. We mentioned last week that the funding structure of the pair is preventing it from trading higher in price terms. Guess what? Over the past three days, the funding structure changed. Especially on BTC, where you are charged for being long BTC. The ETH funding is still unfavourable for longs; this gives us the belief that the ETH bullish move is not over yet.

We stopped right at the invalidation level of 0.033000. It is a tough call right now. Looking at the rest of the market, which is in a bullish mode, we will switch to neutral on the ETHBTC pair. This is also based on our comment from last week of seeing limited potential to the downside and that we will not increase short positions.

We will establish our position into long ETHBTC when we break through 0.033000.

 

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 for Section 2 Market Analysisvision&

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