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09 mai 2019

Crypto Broker Weekly Rotation Report CW 19

Patrick Heusser

Patrick Heusser

Trader chez Crypto Broker AG

A propos de l'auteur

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 altcoin blues continue.

Our empathy goes out to all the altcoin bag holders, but the spotlight is still on bitcoin. Correlation is widening further, especially for the smaller market cap coins. The big 5, however, are still fairly close together.

When looking at our segments of the 2 to 10 and 11 to 50 ranks in terms of MACD, the picture remains very clear. Stay out of altcoins and keep an overweight allocation of bitcoins. An even clearer picture is provided by our advanced decline line. Not only the smoothed line is below 0.5, also the unsmoothed cannot climb above it.

Our call remains unchanged.

 

2 Market Analysis

The crypto market continued its most recent consolidation this week. The « King » is now up about 20 percent since 1 April, which to a certain extent, marked the kick-off into the crypto year 2019. This was after a private investor reportedly purchased $100 million in cryptocurrencies. The market is now at its highest level since last November. The eternal ice of the late long-lasting crypto winter is about to melt, and this certainly spurs hope for a crypto-friendly 2019. In addition to big brother’s big figure change, it was Ethereum that moved into the limelight this week. The number two cryptocurrency profited from a wave of bullish sentiment after Sunday when the Commodity Futures Trading Commission (CFTC) revealed that they are considering approval of Ethereum-based, cash-settled futures contracts. Data showed temporary inflows from BTC markets into Ethereum (ETH) on this announcement. However, bitcoin keeps gradually increasing in dominance, which is a common pattern ahead of a bull market. Important, too, is the fact that the overall market cap has been steadily increasing for a while now, which is an indication that new money is entering the market.

SIX, the number one stock exchange in Switzerland, is reportedly working on its own digital asset exchange. SIX says that the platform launch is planned by early 2020, and a pilot can be expected already in late summer. Canadian Bank RBC made a big leap in modernising their KYC process by introducing a digital ID network that makes use of the Blockchain technology. Facebook is also moving ahead with its plans to launch a cryptocurrency-based payment system on the back of its social network platform. This would be a massive boost for mainstream adoption should that project succeed. Also, Fidelity Investments, once the largest asset manager in the world, which began a custody service to store bitcoin earlier this year, is said to start offering cryptocurrency trading within a few weeks. The service is aimed at institutional investors as the company expects the appetite for trading and safeguarding digital currencies is about to grow substantially. Unfortunately, all that glitters is not gold! Binance, one of the leading cryptocurrency exchanges in the world, announced the discovery of a security breach on Tuesday, which saw approx. 7,000 bitcoins, worth over USD 41 million, stolen and withdrawn from its hot wallet. Binance, however, clarified in a statement following the incident that the firm’s Secure Asset Fund for Users (SAFU), will cover the USD 41 million loss in full and user balances shall not be affected.

 

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

 

6 Market Cap Overview

Figure 4: Market capitalisation overview; Data source: Coinmarketcap

ETHBTC is drifting lower…

I feel a little bit sorry for ETH. I see no chance for ETH to move higher against BTC with the current funding structure. On the one hand, if you want to go short BTCUSD, you have to pay loads of funding to hold that position. On the other hand, you get paid handsomely if you are short ETHUSD. Therefore, the pair ETHBTC will have a really hard time moving higher.

Our call still stands – we are looking for the price to move into the support zone. There is no significant liquidity pool around in that support zone, so we would estimate to find the equilibrium at around 0.02550.

The bearish invalidation level is still at 0.0330, which is far away, and, as we stated above, we think the downside potential is limited to 0.02550. This is an assymetrical risk/reward situation, and I would be careful opening further short ETHBTC positions at the current levels, but see no reason to close the short positions yet.

 

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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