Weekly Market Report - 30th March 2019
This weekly report aims to provide an overview of the crypto markets focusing on secondary market trading. Though nothing here is investment advice, we hope this provides some useful and targeted information.
Weekly Market Report - 30th March 2019
Market Overview
We are focusing our market overview on the top 100 tokens from CoinMarketCap and the sector classification is roughly in line with what MyToken uses with some minor modifications. To be sure, we will be continuously updating the sectors and their constituents as we develop a deeper understanding of the crypto ecosystem.
This week’s new participants in the top 100 coins:
POWR, AION, WICC
Coins that dropped out of the top 100 coins compared with last week:
KNC, NEXO, MOAC
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from February 27, 2019, to March 29, 2019
Since the computing power/mining pool sector seems to have generated abnormal returns due the extreme price surge of Maximine Coin, we remove this sector in the following chart to make the rest easier to view.
Returns vs Volatility
This is a look at mean and total daily returns vs volatility for the 16 sectors as well as the overall crypto and equity market. Some sectors only contain one or two coins/tokens while others have more than a dozen.
Mean Daily Return vs Volatility from February 27, 2019, to March 29, 2019
We abbreviated the names of several sectors to make the graph easier to view:
M = Market
DC = Digital Cash
CP/MP = Computing Power/Mining Pool
A/M = Advertising/Media
G/E = Gaming/Entertainment
C = Classics
D/GT = Dividend/Governance Token
E/T = Exchange Token
OC/I = Off Chain/Interoperability
Correlation Between Daily Returns of Each Sector
Correlation between daily returns of each sector from December 28, 2018, to March 29, 2019. Correlation ranges between -1 and 1. A correlation close to 1 or -1 means a very positive or negative relationship between the two subjects, respectively. A correlation close to 0 means no linear relationship between the two subjects.
The above figure shows the correlation between the daily returns of each sector. This week we see that over the past three months, other than stablecoins, which were designed to have near zero correlation with the rest of the crypto market, the energy and computing power/mining pool sectors also displayed low correlation with the remaining sectors. For those interested, please take a look at POWR and Maximine Coin.
Focus Spotlight — Order Book Depth (Part 2)
In last week’s research report, we discussed the two metrics used to measure the liquidity of a crypto trading platform — trading volume and order book depth. While most crypto data providers such as CoinMarketCap rank crypto exchanges based on trading volume, we believe that order book depth provides a better picture of liquidity as it shows the level of price stability for individual trading pairs.
As shown in our previous report, after computing the number of Ethereums it takes to move the prices of ETH/USD and ETH/USDT trading pairs down by 0.3%, 0.5%, and 1% on some of the top exchanges, we discovered that reported trading volume is not correlated with market depth, as some reporting strong volumes have poor market depth. As a result, trading volume may not serve as the ideal indicator for measuring liquidity.
This week, we analyze if order book depths of these top exchanges have remained consistent over the past few months. We also collected ETH price data to measure if changes in market depth form any specific patterns during different stages in the market cycle. Below we plot the 0.3% order book depths of ETH/USD and ETH/USDT trading pairs from ten different exchanges between November 2018 and March 2019. Again, the daily order book depths used in our analysis are the averages of the 12 snapshots taken on each day. Since market depth fluctuates dramatically from day to day, the following charts use the 5-day moving averages.
As displayed above, the 0.3% order book depths for most trading pairs have seen sharp rises and falls throughout the four-month period. While most of the changes in market depth do not seem to form specific patterns from week to week, trading pairs on exchanges such as Houbi and Coinbase appear to be slightly correlated with one another. If we plot the order book depths for these trading pairs together with the price of Ethereum, as illustrated in the graph below, we see that their overall movements are somewhat correlated to the ETH market and the two price surges in February were preceded by a strong increase in order book depth on the two exchanges.
On the other hand, as for Kraken, the exchange with the strongest market depth, although its 0.3% market depth does not seem to correlate with the ETH market or any of the other trading pairs, its market depths at the 0.5% and 1% levels also appear to be closely related to the price of ETH.
Another thing to note is that while the order book depths on most exchanges tend to fluctuate fiercely, the movements on Binance seem to be less volatile compared to that of others. At the same time, it has also maintained an upward trend over the past few months. Binance’s market depths at the 0.3%, 0.5% and 1% levels have all been rising at a relatively stable pace, with its 0.3% level starting from around 200 ETH back in November 2018 and reaching approximately 600 ETH by early February 2019, indicating an improving level of liquidity on the platform.
As for the remaining trading pairs on other exchanges, unfortunately, we are unable to identify any trends, relationships, or patterns on either of the 0.3%, 0.5% and 1% levels. Hopefully, as we collect more data and expand our database, we will be able to make more observations and share our findings with our readers.
We hope you enjoyed this week’s report. Please leave a comment below to share your thoughts or ideas!
Data Source
We included data from sources such as CoinMarketCap for analyzing price movements, volatility, mean daily return, and correlations between each sector; MyToken for sector breakdown; CoinAPI for order book snapshots; and TradingView for daily trading volume data.
Stay Tuned Here
KRONOS is a leading quantitative research firm based in Taipei, Shanghai and Beijing. We’re bringing new asset management strategies to the crypto world by leveraging our combined decades of experience trading in global traditional markets.
Website: https://kronostoken.com/
Telegram: https://t.me/Kronos_E
Twitter: https://twitter.com/KronosToken
Linkedin: https://www.linkedin.com/company/kronostoken/
