The World of Digital Assets: Cryptocurrency Data Analysis
Market Trends and Forecast
Cryptocurrency is making big waves in the world of finance as many term it the future of money. Though it is a highly volatile market, it is a term that is widely gaining traction and it is said to have the capability to stand the test of time. Before we dive into this analysis, let’s understand what Cryptocurrency actually means, because even though it is an industry that has gained lots of investors and traders, many people still finding a hard time understanding what it all entails.
Give me a coin.
Cryptocurrency, according to Forbes Advisor, is decentralized digital money that is based on blockchain technology and secured by cryptography.
In simpler terms, cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions. It is a system that enables you to send money and receive money from anywhere in the world.
Cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a digital public ledger with access distributed among authorized users. That public ledger is known as the blockchain.
Cryptocurrency is decentralized in the sense that no governing authority supervises the rise and fall of a particular cryptocurrency. Everyone has access to the same information which is heavily secured. This security is made possible by Cryptography, and it enables the transactions that are made to only be accessible by the authorized parties.
You store your crypto coins in your digital wallets.
Moving forward to the main aim of this project, we will be analyzing the market trends of the top 10 cryptocurrencies.
Dataset Overview
The cryptocurrency data that was used for this analysis was web scrapped from Cryptowatch; a popular charting and trading terminal for cryptocurrency markets. In Cryptowatch, all exchange platforms are accessed in one place. The bulk crypto market movement data that was used for this project was scrapped from the Binance Exchange platform, which is one of the crypto exchange platforms found in Cryptowatch.
The market trends and movements of the top 10 selected cryptocurrencies for the past four years were analyzed, starting from 1st September 2018 (2018–09–01) to 5th September 2022 (2022–09–05).
Gathering (Scrapping) the data
The python request library with its methods was used to get the data from the Cryptowatch URL, and the content of the URL is parsed via Beautiful Soup. A helper function is used to get the content of the URL, extract it in JSON format, and then returned it as a Pandas data frame.
The data of each of the top 10 cryptocurrencies was saved to CSV files, and then later merged together into a master data frame.
Assessing the Data
The separate CSV files are read into separate data frames, and it was realized that it would be difficult to know which coin has the information in a particular row if they are all merged together. So, two new columns containing the symbol and names of the cryptocurrencies were created before the separate data frames were merged.
Data Cleaning
The CloseTime column was converted from object to DateTime data type. We then extracted the Date column from the CloseTime Column. Our data frame has no missing or duplicated values.
And here is our final DataFrame:
Data Columns Description:
The dataset has 9 columns in total.
CloseTime: This refers to the particular date and time of market movement of a coin. From this column, we extracted the Date column.
ClosePrice: The Closing price of a coin within a 24-hr time frame.
OpenPrice: The Opening price of a coin within a 24-hr time frame.
HighPrice: The highest price of a coin within the same 24-hour time limit.
LowPrice: The lowest price of a coin within the same 24-hour time limit.
Volume: the number of coins traded within a day; 24 hours.
MarketCap: the crypto market cap is the market value of a cryptocurrency. It’s derived by multiplying the total number of mined cryptos and the prevailing market price. Since the number of mined cryptos and market price keeps changing, the crypto market cap also keeps fluctuating.
Market Cap = supply x price.
Exploratory Data Analysis
Univariate Analysis
Distribution of the Selected top 10 Cryptocurrencies
We observe that we have had more Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP) cryptocurrencies market tradings on the Binance trading platform (via Cryptowatch) between 01-September, 2018 till 5th-September, 2022. SHIBA INU(SHIB) was the least traded coin as compared to other coins that were scrapped for this project.
Bivariate Analysis
Visualization with Stacked Bar Chart
Top 5 Cryptocurrencies by Market Cap
We can observe from the graph below that for the period of four years, Bitcoin (BTC) has had the highest market cap, followed by Ethereum (ETH) and Ripple (XRP). USD Coin (USDC) is the coin with the least market cap as compared to the other four coins.
Coin Performance as Per Open Price
We observe that Bitcoin (BTC) has the highest total Open Price, followed by Ethereum (ETH), and Universal Market Access (UMA). But we see Bitcoin Open Price almost making the open price of other coins invincible due to how high it was.
Here, Bitcoin (BTC) and Ethereum (ETH) are removed, and we see that Universal Market Access (UMA) is the coin with the highest Open Price between 1st September 2018 and 5th September 2022.
Coin Performance as Per Close Prices
We observe that Bitcoin (BTC) is the coin with the highest close prices, followed by Ethereum (ETH). And Bitcoin’s close price makes the prices of other crypto coins invincible due to the high gap between it and those coins.
Here Bitcoin (BTC) and Ethereum (ETH) are removed, and we can see that the Universal Market Coin (UMA) is the coming with the highest number of high close prices.
Visualization with Time Series
Top 5 Cryptocurrencies by Market Cap
We see here that Bitcoin (BTC) wins as the coin with the highest Market Cap over the years.
And we take Bitcoin out of the picture, and Ethereum (ETH) and Ripple (XRP) start winning.
Both Bitcoin (BTC) and Ethereum (ETH), and the least traded coin; SHIBA INU (SHIB) are removed from the picture, we see that Ripple (XRP) compared to other coins is the coin with the highest market cap.
Coin Performance as per Close Prices
We observe that Bitcoin (BTC) as exposed in the time series analysis has had the highest close prices between 1st September 2018 and 5th September 2022. The close price rose to almost 70,000 dollars in late 2021.
Here because Bitcoin’s high close price is so high that other coins’ close prices become so little, we remove it, and we see Ethereum become the next giant.
Bitcoin and Ethereum have had the highest Market Value for the past four years.
Multivariate Analysis
Overall Market Trend Performance of coins with Candlestick Chart
A candlestick chart is an interactive chart; a combination of multiple candles that a trader uses to anticipate the price movement of a cryptocurrency.
The candlestick chart is made up of these two green and red candle sticks.
In a candle stick chart, we look out for two types of trends, known as Bullish and Bearish trends. The green stick represents a bullish trend where the close price of a coin is higher than the open price and the red stick represents where the close price is lower than the open price.
We know that the market trend of a coin has a good risk when the green candle stick is higher than the preceding red stick (even though it’s not the only thing we should consider). Because for a coin to be good, of course, the close price should be higher than the open price.
A bullish trend shows buying pressure while a bearish trend shows selling pressure.
The following image represents what a candlestick chart looks like.
Now back to our analysis.
We could observe a symmetric pattern in the Bitcoin (BTC) and Ethereum (ETH)’s candlestick charts.
Symmetric patterns happen when buyers and sellers become indecisive about the market and the price starts to squeeze due to the unavailability of supply and demand. The patterns show bullish and bearish trends at different points in time, and the volume usually drops with time while this pattern is formed.
We observe that in the USDT market trend, for example, the market trend is very volatile and should be avoided as much as possible. It’s not so clear when you should buy and sell in that market because the bullish and bearish trends aren’t visible.
Overall Market Trend Performance of coins with Moving Average Indicator
The Moving Average indicator is a way to calculate the average of an asset price over a specific period of time. We are looking at the course or trend that the each of above cryptocurrency prices has taken over a set period of time.
From the graphs below, I calculated two different moving averages for each coin. The short-term moving average was for 50 days, and the long-term moving average was for 200 days. This allows us to know the best time to buy these coins.
If the short-term moving average (orange in color) crosses over the long-term moving average, the market is said to be bullish or experiencing an upward trend, otherwise, the market is said to be bearish or experiencing a downward trend.
We could observe three bullish crosses and three bearish crosses in the Bitcoin (BTC)’s crypto market over the period of four years. The last crossing point wasn’t clear as both moving averages merged together. We can’t specifically say if the BTC market at that point is bullish or bearish.
In ETH and MATIC market, a bullish cross is seen appearing as the last crossing point of the moving averages. This shows a bullish trend in those crypto markets it also indicates a good time to trade on those coins.
Then as much as a bullish trend is shown in the USDT’s market, it’s still a very volatile market, so it is advisable to avoid the market at the moment.
Conclusion
The following insights are gained from our analysis:
- Bitcoin has had the highest Market Cap over the years, followed by the Ethereum coin.
- Bitcoin’s (BTC) Close price has always been the highest which makes the high price of other cryptocurrencies invincible. Ethereum (ETH), Universal Market Access (UMA), and Polygon (MATIC) also showed high Close Prices when compared with other cryptocurrencies. The graph shows that BTC, ETH, and Universal Market Access (UMA), had high values for the past four years.
- With a candlestick chart, there has been a symmetric pattern in the selected crypto coins’ prices for the past four years, and this is said to happen when buyers and sellers become indecisive about the market. There were bullish and bearish trends at different points in time, and the volumes of the coins were seen to drop over time due to this pattern.
- The USDT market trend is very volatile and should be avoided as much as possible. It’s not so clear when you should buy and sell in that market.
- The graph of Moving averages of coins against their Close Prices shows that the Bitcoin market is currently neither bullish nor bearish, while ETC and MATIC markets show a bullish trend which indicates a good time to trade on those coins.
This was a very challenging but exciting project for me, and I hope I was able to give you a basic understanding of how the cryptocurrency market works.
This is to say that the Crypto market is very volatile as the patterns keep changing every second and so it is advisable to go deeper and do more research before, we trade a coin. :)
And here’s a link to the dashboard report I designed at the end of this project. It is an interactive report where I utilized the built-in predictive forecasting models of Power BI to forecast future market trends of the selected cryptocurrencies based on 95% confidence values within the next 12 months.
Interact with my Dashboard report here.
You can access the full code for this project in my GitHub repo here.
