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.
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:
XMX, JCT, CCCX, BZNT
Coins that dropped out of the top 100 coins compared with last week:
WAX, SAN, NAS, GRIN
Rolling Returns of Top 100 Tokens by Sector
Returns of the top 100 Tokens by sector from June 11, 2019, to July 11, 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 June 11, 2019, to July 11, 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 11, 2019, to July 11, 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. Though the correlation within the crypto space does not seem to change much over the last week, we do see a slightly higher negative relationship between the crypto market and the SP500.
Focus Spotlight — Buying the Dip
Since April 2019, the crypto market has embarked on a bullish trend. Between April 1st and July 1st, Bitcoin surged from $4,158 to $10,817, recording a monthly average gain of 38%.
While Bitcoin continues on its upward trend, there are several retracements along the way. Though the majority of crypto investors are bullish on Bitcoin, the important question however is how long you should wait after a price drop before entering the market. This is often referred to as “buying the dip.”
In the following, we will take a closer look at the duration of retracements. Here we define a retracement or a dip as a price drop of over 5%. The goal is to find the expected time between the peak and trough in a bull market. As illustrated below, we are counting the number of days between the blue and red lines. Here we are using Bitcoin’s daily closing price.
As shown above, between Feb and July 2019, there are only 5 instances where the price of Bitcoin dropped by more than 5%. The average time between each peak and trough is 6.4 days.
If we redefine a dip as a price drop of more than 3%, there are 8 instances with an average length of 4.9 days.
Further decreasing the rate to 1%, there are 12 instances with an average length of 3.9 days. However, if we plot the number of occurrences for each length, as displayed below, we see that there are 6 instances where prices touched the bottom within two days. Meanwhile, there are only 2 instances where prices continued its downward movement for more than 5 days.
In contrast, Ethereum, with much greater price volatility, has a higher average time for each retracement.
Using Bitcoin price data from the last crypto bull run in 2017, we also see that the majority of Bitcoin’s retracements ends within 5 days.
The two charts below summarize all the times where Bitcoin fell by more than 1 percent during the two bull markets in 2017 and 2019. The column on the right shows the number of days it takes for BTC price to recover back to its original level.
The results above show that it is rather difficult to estimate the time between each peak and trough since the time can range from 1 to up to 35 days. However, we do find that if the price drops by more than 1% and does not establish a bottom within 5 days, there is a high chance that it will continue to fall and incur a total loss of more than 10%
In this report, we provide an overview of Bitcoin’s retracements during the last two bull runs. However, past results are not necessarily indicative of future results. Investors should do their own research before making investment decisions.
Thank you for reading this week’s report! Please leave a comment below to share your thoughts and ideas on crypto trading!
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.
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.