Weekly Market Report - 8th June 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 - 8th June 2019
The cryptocurrency market has remained volatile for the past few years. For investors, it is always best to evaluate the fundamentals before making any investment decisions. Want to learn more about on chain data and crypto valuation techniques? Read this week’s report to find out!
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. 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: HEDG, NULS, XZC
Coins that dropped out of the top 100 coins compared with last week: ORBS, R, LA
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from May 7th, 2019, to June 7th, 2019
Returns vs Volatility
This is a look at the mean and total daily returns vs volatility for the 15 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 May 7th, 2019, to June 7th, 2019
We abbreviated the names of several sectors to make it 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 March 7st, 2019, to June 7th, 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. Correlation between the gaming/entertainment industry and the rest of the market has dropped slightly over the past week. This is mainly due to the unusual trading pattern of Aurora (AOA) between May 24th and June 7th.
Focus Spotlight — Day of the Week Effect
Seasonality has always been a hot topic in the equities market. Price anomalies caused by irrational market participants often provide trading opportunities for those that are able to identify these patterns. Earlier this year, Kronos Research Team released a report delving into the “Chinese New Year Effect,” which highlighted the price behavior of Bitcoin around the period leading up to the holiday. In this report, we will be looking into the “day-of-the-week effect,” focusing on the trading patterns between different days of the week. We will be using trading data from Binance, Bitfinex, OKEx and Huobi. The time frame for this analysis is between December 2018 and May 2019.
In the following, we take the BTC/USDT and ETH/USDT trading pairs and calculate the average 24hr returns associated with each hour in each day of the week. For instance, the number on the top right corner indicates that on average, the return rate for BTC/USDT is approximately 0.86% from Saturday 01:00 (UTC) to Sunday 01:00 (UTC).
The two charts above indicate that buying Bitcoin or Ethereum between Wednesday and Thursday afternoon tend to lead to a loss 24 hours following the purchase. On the other hand, purchases made on Fridays are more likely to generate profit the next day. To determine whether or not this pattern has persisted over time, we draw the 24hr return charts for each month for the BTC/USDT trading pair. The charts on the left-hand side show the hourly return of the trading pair every month. The charts on the right-hand side show the total hourly trading volume on the four exchanges.
As displayed above, over the past six months, average returns for each day of the week failed to show a consistent pattern. On the other hand, while many studies in early 2018 showed trading volumes accumulating on Fridays and Saturdays, we do not observe such a pattern in our analysis. Instead, overall trading volume had been distributed evenly throughout the week with random spikes from time to time.
This discrepancy may be due to the shift in the composition of market participants. From 2013 to 2017, the majority of Bitcoin’s trading volume was contributed by retail investors. Trading activity had been largely dependent on investors’ time schedules and often affected by mood swings between weekdays and weekends. Now that institutional investors are entering the market and a large portion of trading has been automated, the market is less likely to continue experiencing these effects. As a result, it is becoming increasingly difficult to identify these day-of-the-week effects in the crypto market.
Thank you for reading this week’s report! Please leave a comment below to share your thoughts and ideas on crypto trading!
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; and KronosResearch for Bitcoin and Ethereum trading 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.
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