Weekly Market Report-July 27th, 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.
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:
UUU, NEXO, WAX
Coins that dropped out of the top 100 coins compared with last week:
SAN, THR, DENT
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from June 25, 2019, to July 25, 2019
Futures vs Spot Premium
Futures premium on OKEx and BitMEX from June 25, 2019, to July 25, 2019
Here we are using BTC/USD futures contracts from OKEx and BitMEX. Futures premium is calculated by taking the price difference between futures and spot then normalized by spot price.
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 June 25, 2019, to July 25, 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 April 18, 2019, to July 18, 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.
Focus Spotlight — Binance Bid-Ask Spread
The crypto market has undergone major expansion since the start of 2019. With institutional investors entering the crypto space, the market has seen a large inflow of capital.
In an open and transparent market, changes in liquidity can be observed not only from the rise and fall of trading volume but also from the bid-ask spread. Bid-ask spread is the price difference between the best bid and the best ask. A market with improved liquidity will likely have reduced spread and vice versa. Therefore, one would expect a negative relationship between the two.
Below we first take a look at the distribution of bid-ask spread for the 1st and 100th trading pairs on Binance. Here we are using the order book history recorded on July 25, 2019 of which snapshots are taken every second.
As displayed above, BTC/USDT has a positive skew where market spread is maintained below 0.05% throughout most of the day. In contrast, ERD/USDC, with a lack of liquidity, has a higher spread distributed across 1% to 8%.
In the following, we plot the 24h volume and the daily average bid-ask spread for all the trading pairs on the exchange. We are using order book snapshots taken at the start of each hour. The numbers shown in our analysis are the averages of the 24 snapshots.
Due to multiple trading pairs such as BTC/USDT and BNB/USD having significantly high volumes, we take the log transformation of trading volume in the following chart.
On Binance, we find multiple trading pairs with low trading volume having high bid-ask spreads exceeding 10%. Further examining the data we find that all trading pairs with $5 million daily volume are able to maintain their spreads within 0.1% throughout the day.
The chart above shows changes in bid-ask spread for the top 3 trading pairs since November 2018. Compared to other trading pairs, BTC/USDT, displayed in red, has been able to achieve lower and more stable spreads over the past 8 months.
Overall, market liquidity for most trading pairs on Binance has improved significantly moving into 2019. Although we do not observe a clear trend in Q2 2019, we do see significant drops in market spread for all three pairs during the two recent rallies in early May and late June.
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; Kronos Research for OKEx, BitMEX and Binance trade history and orderbook 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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