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10 October 2019

Crypto Broker Weekly Rotation Report Week 41

Patrick Heusser

Patrick Heusser

Senior Trader at Crypto Broker AG

About the author

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.

Should you wish to receive this weekly report by email, you may subscribe below.

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

Intriguing data.

Since my focus was on the price movements versus USD and not against BTC this week, I did not notice the strength that some altcoins built up.

The build-up is also nicely displayed in the MACDs, which have shown a continuous uptrend since mid-August. But having said that, the MACDs only turned bullish properly since mid-September by crossing the dotted line, and now have a bullish crossing of the two indicators (green area). Even with a more conscious approach and taking the smoothed advance decline line into account (purple line), we only had a very quick bullish signal around September 17th and then again a more sustained one on October 3rd.

In case you jumped the gun too early and went into long altcoin positions in September, you’ve experienced a rough couple of weeks. The market dropped substantially, but by now it has returned to entry levels. In case you waited a little longer and entered into long altcoins around October 3rd, you have some nice gains of about 10%.

This goes to show yet again that one has to be really patient and wait for most of the watched indicators to turn. Unfortunately, we missed it by recommending to stay on the sidelines last week. With current indicators being level, we are starting to move cautiously into alts again and overweight versus BTC.

 

2 Altcoin Futures Basis Analysis

The new table has been implemented. We hope that the new formatting and new exchange (FTX) will provide you with greater added value when looking at the data. To offer more meaningful data, we decided to calculate some BitMEX bases versus USD. Since we have more currency pairs versus USD from the two exchanges, we believe it makes sense to add the BitMEX basis in USD as well. The calculation is simple and also practical. We are using the BitMEX altcoin versus BTC and add in the BTC$ basis from BitMEX too.

We had a few data glitches, eg in TRX$ the datafeed was done during closing. These types of issues will be solved by next week and we will be able to present you a fully updated weekly basis change table then.

Regarding the data we are able to see this week, I would like to point out that almost every basis (except EOS) is in contango. This might entice you to see a bullish sign, but you have to take into account that we are looking at basis versus USD. The main driver for the USD basis is BTC$, which shows roughly 1% for the Dec19 and almost 2% for the Mar20 basis. This means that if we look at a calculated altcoin versus BTC basis, most of them would be flattish or slightly negative, hence in backwardation.

It is surprising to me that the main driving basis of BTC$ has not turned into backwardation.

To be more consistent with our report, we have constructed the FTX altcoin index versus BTC on TradingView. This will offer more added value to our holistic Rotation Report analysis, which only focuses on price movements versus BTC.

View the charts: Altcoin index (4-hour)Midcap index (4-hour)  |  Shitcoin index (4-hour)

 

Figure 1: Altcoin Futures Basis Overview

 

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: Volatility comparison; Data source: Coinmarketcap

 

Figure 3: Correlation comparison; Data source: Coinmarketcap

 

5 ETHBTC 4h Technical Chart Analysis

Figure 4: Data source: Bitfinex; Chartsystem: Tradingview

 

ETH strengthens further against BTC

We almost hit the extension of the upper leg of the large descending triangle that we broke in July. ETH just keeps outperforming BTC continuously (positive performance) on both up and down moves. This resulted in a further outperformance of over 4% versus BTC.

From a technical chart analysis point of view, the correction is still going strong. The next tough resistance is between 0.0250 and 0.0260 (resistance zone).

In case we break through the lower leg (horizontal line) at around 0.0250, my big picture view of the large descending triangle will need to be reviewed. I have to admit that it is a steep correction and I did not anticipate it. But from a technical textbook standpoint this is nothing abnormal.

Place your stops for any short position above 0.026. Since this is a big picture trade you need to give your trade some leeway.

ETHBTC 4h chart (above)
ETHBTC daily chart

 

6 Market Capitalisation Overview

Figure 5: 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.

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