What can we learn from the recent market crash? PCTA’s data experts share their insights
“What can we learn from data about the recent market crash?”
At 21:00~22:00(UTC+8) on November 29th 2018, the Public Chain Technology Alliance (PCTA) hosted its 3rd live ask-me-anything (AMA) session at the r/CryptoCurrency channel on Reddit.
Representatives from PCTA partners, including Nebulas, Ruff Chain，Marsfinance, Bottos, Xmax, Searchain, NULS, Datanno, Liquidity Capital, Tokenclub, and Huobi Research joined the discussion. Representatives from the above-mentioned projects shared their viewpoints on the current crypto market crash.
All welcomed to follow @BitsclubPCTA on Twitter and the PCTA Reddit Channel.
Guests invited to this AMA included:
Nebulas founder Hitters Xu, Nebulas co-founder Aero Wang, XMAX CEO Hughes Ching, Searchain.io CEO Zun Wang, Tokenclub CEO Tong Gao, Ruff Chain CEO ROY, Senior partner of Liquidity Cap Daniel, Huobi Research data analyst Benjamin Shi (Hai Du), Senior researcher of Nebulas Research Institute Zaiyang Tang and the overseas community manager of NULS, Essam.
Some key themes and takeaways from the AMA include:
1. What are the biggest challenges in your data analysis? What’s lacking in blockchain data at the moment?
Answer: Aero Wang (Nebulas co-founder)
The biggest challenge now is that we don’t have enough data. Generally, we only have two types of data: transactions, and smart contract invocation. For exchanges, they may have the identification behind an account. But still, that’s far from enough.
Another problem is how to extract useful information from these data. For a transaction, we can get some metadata, such as the from address, to address, value, block height, etc.
Answer: Zun, (CEO of Searchain.io)
The biggest problem is the lack of data for analysis, which is also a shortcoming: the market lacks more dimensional data and the discussion of data mining. From the current published research, we find that the data dimensions used are relatively simple, and most of them are basic on-chain indicators. In fact, there are still a lot of data that can be explored to aid research, but there are very few companies on the market that offer deep data mining. Searchain.io is committed to doing this, providing common basic data on-chain, for example, such as the number of transactions, transaction amount, daily active address (DAA), and more. Dmitry Kalichkin and Clearblocks used indicators such metrics as DAA and the number of transactions when doing Metcalfe’s Law-based models. One of the questions we think about when applying these theories is how do we define active addresses? Zhang et al. (2015) used a monthly active address to evaluate Facebook in the paper. Is the number of daily active addresses the optimal variable for evaluating cryptocurrency? Is the weekly active or monthly active address a better measure of the value of the cryptocurrency? And how many ways can we define active? Is it more appropriate to use continuous activity, or to use a cumulative measure to calculate?
Besides, the “active address” can also be studied in combination with the “new address” metric. For example, how many of the addresses that are active on the day are active from a new address, and what percentage? How long can the new address be active for?
These more in-depth discussions about data on the chain are rarely seen in the market today. Practitioners’ understanding and attention currently reside in transaction data, such as prices, volume, and others in exchange. Whereas the value of on-chain data is ignored. This is what we think is insufficient and regrettable in the current blockchain data landscape.
Answer: Hughes Ching (XMAX CEO)
Although blockchain data is available to anyone who wants it, here are some of the challenges:
1. Too much data (Ethereum is approaching 1TB depending on your node settings)
2. To get unrestricted access to data, you’ll need a full node
3. Many blockchain explorers limit how you interact with data
With hundreds of Gigabytes of text being stored in blockchains, it’s difficult for an individual to organize the data and sift through it in a way that makes sense and helps you find the answers you want.
Also, while many blockchain data sites exist, sites like etherscan.io will limit you to 3000 records during downloads and 10,000 via API requests. To make sense of the market or do different types of big data analysis you’ll need more data, which currently few sites will provide. The option is to set up a full node. However, this can get technical as popular node software like Parity or Geth tends to use command line interfaces.
Answer: Daniel (Senior partner of Liquidity Cap)
Well, it depends what kinds of data you are talking about. As a liquidity provider, the data matters to us is market data, not those data on blockchain apps, our data is more effective. Our challenge is that there’s loads of fake data around, e.g. projects community numbers, meaningless numbers of media exposure. What is lacking is a dash of honesty, which leads to all kinds of data distortion.
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2. My question is the understanding of velocity. If you or anyone could share more info and their opinions about the velocity of the asset and how it affects the value of a digital asset.
Answer: Hi, there. This is Dr. Tang Zaiyang, co-author of Nebulas Rank Yellow paper. Thanks for your question. I will try to answer.
When we talk about “tokens”, it is most often used to refer to both utility tokens and security tokens. While in the Yellow paper, we don’t take the difference into consideration. One thing that is clear is cryptocurrencies should play a basic role as currency at first. According to Humes’s theory in the quantity of classical currency, the total price level will be adjusted to make the monetary supply and demand equal in the long term. Usually, the velocity of money (or cryptocurrency) should be stable in a healthy ecosystem. On the other hand, we would not say that the token price (eg., NAS) should be as stable as the velocity. As shown in the equation on page 8 of yellow paper, the price level is also related to the total monetary amount and economical output (also defined as GDP). Ideally, we hope that people in blockchain are encouraged to create something of real value (maybe the killer DApp) rather promoting velocity arbitrarily.
3. With respects to the market crash and the bear market of 2018, will there ever be a time where solid projects and successfully valued digital assets will be able to decouple from Bitcoin and the volatility of Bitcoin. It is pretty concerning that everytime Bitcoin crashes or goes up the altcoins suffer the same fate. Wouldn’t it be better for these tokens to decouple from Bitcoin and have to succeed or fail on their own merit? And if it is possible, what will it take for strong coins to fly on their own wings and not have to be at the mercy of Bitcoin or Ether?
Answer: eeaassssy (Overseas community manager of NULS)
My opinion is yes, the next wave will come from the adoption of actual use cases from the various projects in the space currently. Eventually, we will see more and more projects becoming decoupled from BTC and having a price of their own.
Answer: Hughes_Ching (XMAX CEO)
If the ecosystem of a public blockchain has enough users, we believe it has a chance to decouple from the volatile nature of Bitcoin and Ether, especially Ether. EOS used to be a ERC-20 token, but now it is its own coin and is surpassing Ether in some ways. EOS is already challenging the Ethereum network, and just as we see a successful example here, we also have a chance. However, decoupling from Bitcoin will be more difficult.
Answer: Daniel (Senior partner of Liquidity Cap)
Bitcoin will always be the face of crypto & blockchain, although alt-coins may decouple slightly while cryptocurrency market shrinks. My opinion is that regulated security tokens will have a big play in the next waves, so my eyes are on those good tech company doing solid security token offerings or working on getting concrete assets like real estate tokenized.
The top 10 cryptos with big company backing will endure the bearish market, e.g. prominent stable coins pegged to USD, XRP, BCH.
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4. What are your thoughts on the recent Bitcoin crash? Could this result be predicted in advance? Which predictions are achieved through data analysis?
Answer: Aero Wang (Nebulas Co-founder)
Thanks for your question. Actually, there is some evidence for the Bitcoin crash. Yet, we cannot separate this evidence from other noises before the crash. This is quite common when predicting something via data analysis. Although we can always find some evidence after the crash, it is really hard to identify such signals before the crash.
Another thing about data is gaming. Suppose everyone has the same result from data analysis, and someone will make a decision, named A. However, there are also some people make their decision, B, based on their awareness of decision A. And there will be decision C based on the awareness of decision A and B. The chain of decision could be very long. Consequently, we may don’t know which decision is the best even if we have a very precise data analysis result. So we almost can’t do any meaningful prediction purely based on data analysis.
Answer: Hughes_Ching ( XMAX CEO)
A very big part of the reason is that of the recent Bitcoin Cash hard fork. There was a war between Bitmain’s Jihan Wu and Craig Wright, who famously claimed to be Satoshi Nakamoto. This BCH hard fork divided the community, and because of this a lot of people saw that it’s very easy for people like Jihan Wu or Craig Wright to influence decentralized networks. This then caused people to lose faith in the market and to start pulling out of not just Bitcoin Cash but also other coins.
This result could be predicted because the parties publically announced that they would have a war, so this isn’t news. The risk was always there. But when they finally decided to go to war, not everyone realized that the point was to get out of the market. That’s the reason for the crash. BCH lost 50% of its value after the crash.
Answer: TongGao (CEO of TokenClub)
Blockchain technology provides the completed shared ledger which includes all the transaction history data, and it has a great advantage for data analysis. For example, it is estimated that with the integration of blockchain technology and payment, transfer and other financial services, the data it covers will be worth trillions of dollars. Big data analysis is of great importance to tracking transaction information, as it can help financial institutions to detect fraud and make smarter decisions. At the current stage, people still focus on the blockchain data acquisition rather than optimizing it to get more useful information. My PhD research focuses on data mining, and I found the most serious problem is about sourcing data. In the blockchain industry, however, data source becomes an easier problem, so we can focus more efforts on data modeling and data analysis. TokenClub is a comprehensive cryptocurrency investment service platform, which is also committed to integrating data analysis and AI with our business models to offer better services.
Answer: searchain_Z (Zun, CEO of Searchain.io)
From the perspective of valuation models and metrics, it is possible to see the downward trend of Bitcoin. For example, the valuation models such as NVT and NVM indicate that bitcoin prices were overvalued in the recent period.
Valuation view: The NVT ratio (network value to transaction ratio) is similar to the PE ratio used in the stock market.
Based on Willy Woo’s opinion, when BTC’s NVT ratio exceeds its upper boundary, it indicates that the BTC market value is in an unsustainable bubble, and the BTC price will fall when the bubble bursts. Before the BTC crash, the NVT indicator had soared above the upper boundary in February 2018 and remained above the upper limit for a while. According to the NVT indicator, the market price of BTC can be considered overvalued, and the price of BTC will be decline. NVM ratio shows a similar result of NVT ratio, which also suggests a downward trend of BTC price.
Metrics View: When discussing the market price of cryptocurrency, the degree of transfer activity and user activity on the chain (that is, the Fundamental Value) cannot be ignored. So, based on these indicators, it is not surprised to see a decline in BTC price.
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5. Besides trading, what are the other uses of blockchain data?
Answer: TongGao (CEO of TokenClub)
From my perspective, the future blockchain applications include ID verification, contract signature, data share between financial service providers, etc.
Answer: Aero Wang (Nebulas co-founder)
Theoretically, we may destroy a country based on blockchain data. Just like destroying a country via placing economics sanctions against that country. Unfortunately, we only have transactions and smart contracts on blockchain now, and can’t do much from these data. We can expect that there will be more applications and more data on blockchain. But it’s still not clear what other uses of blockchain data are for now.
One possible trial is, constructing a transaction graph via the block traces to exploit the hidden information. Based on the transaction graph, we can evaluate the accounts by some algorithms such as PageRank or our Nebulas Rank(NR). Note that manipulations (e.g., Sybil attack) are more common on blockchain systems, it is necessary that taking the anti-manipulation into consideration.
Answer: benjaminshi (Huobi Research data analyst)
Blockchain is the infrastructure, just like the Android system, which can run various types of applications (we call them DApps, and Bitcoin is one of them). What are the uses of blockchain data depends on what type of DApps running on the blockchain? The most typical example: Currencies, private equities, public equities, voting, contracts, degree/certifications, patents,etc..
Answer: searchain_Z (CEO of Searchain.io)
Nowadays the development of the usage in blockchain data is at the beginning stage. The following areas can be explored. Basic data statistics and analysis. For example, the number of transactions, the transaction amount, the number of active addresses and other standard statistical indicators. These indicators can reflect the “health” and development of cryptocurrencies. At the same time, we have redefined and modified some basic indicators. For example, the number of transactions, we think that the traditional way of counting how many transactions per day is not reasonable, we are more concerned about measuring transfer behavior, so we made more detailed statistics from the perspective of trading.
Because of the characteristics of the blockchain, we can get some data that is difficult to obtain in other fields. It is not only valuable for analysing blockchain, but also for other financial areas. At the same time, the behavior, psychology, and game theory behind the data are also fascinating.
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6. Hey, if you guys have focused on recent crypto market crash, based on the press news and the conclusion of your research for this event, what do you think the subsequent market conditions would be? Which tokens play an important role in this market now?
Answer: Aero Wang (Nebulas co-founder)
Data analysis tells so much about the subsequent market condition that we can’t understand which one is the right future. So the answer is we don’t know the future. For this market now, we know that BTC, ETH and USDT play very important roles and the fork of BCH also impacts this market a lot.
Answer: Daniel (senior partner of liquidity cap)
The market will continue to shrink to a point most alt-coins are vanquished. Few tokens could survive except the major ones.
Answer: Hughes_Ching ( XMAX CEO)
Bitcoin is currently and will always be the most influential token in the market until we have revolutionary advances in technology.
The top ten tokens also play an important role, and new tokens (XMAX included) are working hard to join them.
Answer: searchain_Z (CEO of Searchain.io)
If we look at this question based on the perspective of data on-chain, in the short-term, BTC and ETH lack the motivation for intrinsic value growth although the market price may rise, the short-term overall bearish.
However, in the long run, many valuation model signals tend to change the status from overvalued to a reasonable level. If the trend can keep sustained, it is a sign for BTC to be considered to rise again.
Also, the fundamental metrics on-chain shows a similarity result in the long-term period, from April 2018, the number of BTC active and the new address has started to increase slightly. If the upward trend continues, the long-term price of BTC will be still optimistic.
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7. Since the beginning of crypto, the market has been volatile, subject to manipulation and emotionally driven which is understandable for a new asset class. In your opinion(s); (1) When will we begin to see some level of stability in terms of value? (2) Until there is stability, is it logical to use digital assets in real world scenarios?
Answer: Aero Wang (Nebulas co-founder)
Thanks for your questions, for the first one, limited by the existing infrastructure and use cases, many digital assets prices still depend on users’ vision and consensus, which inevitably causes long and short cycles in building and destroying market information. At the same time, fiat currency has its own liquidity cycle too, the superposition of these cycles amounts to the high fluctuation of digital assets in comparison to fiat currencies. Here we exclude the stability of stable coins pledged by fiat currencies.
There are several aspects to take into consideration while estimating when the slowdown in asset volatility on the blockchains could occur:
- When the use case of the token as a value carrier has really begun to generate “value”. In other words, these blockchain technology services represented by tokens replace our existing technical standards and solutions by providing improved productivity.
- The general population gradually catch up their understanding of blockchain, the public’s expectation of new things eliminates information asymmetry.
- Of course, not all crypto are the same, and the individual differences can be huge. In a nutshell, some tokens are not born for “stability.”
For the second question, If you are referring to a typical fiat currency payment scenario, it’s not logical. Therefore, most of the time we don’t use crypto in such payments, unless it’s for special reasons such as cross-border remittance, privacy reasons, etc.
Answer: Daniel (Senior partner of Liquidity Cap)
As alt-coins are entering the age of extinction, security tokens will be in regulated, globally recognized markets, where better oversight and stability are offered.
You can only use BTC worldwide is few countries and limited scenarios now, it will get better. Check out apps like Wirex.
(Follow @BitsclubPCTA on Twitter on the PCTA Reddit Channel!)
8. Hello, in your opinion, does fiat currency have to crash in order for cryptocurrency and blockchains to be massively adopted? In conjunction, what type of catalyst will it take for these crypto projects to see the mainstream light?
Answer: eeaassssy (Overseas community manager of NULS)
No, fiat doesn’t have to crash. New people learn about blockchain on a daily.= basis. Events like those Greece and Venezuela show that negative fiat events can hasten cryptocurrency adoption, but this technology will become mainstream with or without the fiat system failing.
Answer: hitters_xu (Nebulas founder)
When cryptocurrency or we say bitcoin firstly came into the view of the mass public, it was partially associated with the financial crisis in 2012. This, however, may have just been a coincidence. It’s hard to say if there is a strict correlation between the two. Blockchain has its own vision, the massive adoption of blockchain technology will depend on how well-developed the underlying infrastructure of blockchain is and how many users could enter into the blockchain industry.
Answer: Aero Wang (Nebulas co-founder)
As mentioned before, when the “token” which is regarded as the value carrier has really begun to generate “value”. In other words, these blockchain technology services represented by tokens replace our existing technical standards and solutions by “improved productivity”.
(Follow @BitsclubPCTA on Twitter on the PCTA Reddit Channel!)
9. Is there something that can be measured from this crash that seems insignificant but is actually a key player? Are there any remarkable correlations or parallels that can be drawn from this crash?
Answer: Aero Wang (Nebulas co-founder)
I guess there’s no such “key index”. The current form of digital asset exchange is influenced by a lot of factors, and this situation can can be described as one of “super disorder”, or we could say the global digital asset exchange creates a common “game” or “collaboration” through a global, highly liquid market. And in this game, if there is really such a “key index”, as soon as the public discovers it, it will lose its impact. But for the whole industry, there are still a lot of centralized nodes, therefore information asymmetry would still exist.
Answer: Daniel (Senior partner of Liquidity Cap)
Tulip mania and dot.com bubbles, have a sip of some Chinese bubble tea while reading these stuff, it’s a true comfort knowing us mankind has stumbled on similar doggy things all along.
(Follow @BitsclubPCTA on Twitter on the PCTA Reddit Channel!)
10. The wild fluctuations in price suggests that the overall size and the liquidity of markets may be overestimated. Shortcomings of market caps as a metric of market size have been frequently discussed. Have you found a better metric for quantifying liquidity and the propensity of coin market price to fluctuate? Care to share them?
Answer: Hughes_Ching (XMAX CEO)
First I look at the fundamental value proposition of a project. You need to decide whether the project has intrinsic value. Does it have the technology, a business model? Will it be commercially successful? People investing in blockchain tend to value technology more than the business nature of a specific project, which we think is wrong. When I buy a token, I see the business model as an equally important part. There is no way you can avoid facing the economic cycles in cryptocurrency. If you frequently trade you are likely to lose to the market, so it’s better to buy and hold. The liquidity is shrinking, but this is not just in crypto markets. Liquidity is shrinking worldwide for many equity markets, so we believe it’s not being overestimated. The entire crypto market is an equity market, and it’s one that’s a lot riskier than traditional equity markets like the NASDAQ or the NYSE. So we see more liquidity pulled out of this market.
11. Question to XMAX: After big crash we saw bottom ETH about 0.00000135 and BTC about 4 sats. So already dumped 10x from ATH. Price nowadays about 2.5x from bottom. Do you think we can see new ETH if market go higher? Also do you any plan to protect holders such as airdrop, buyback etc?
Answer: Hughes_Ching (XMAX CEO)
ETH will probably not reach an all-time high in the short term, and I personally don’t think it’s possible within a year. For XMAX token holders we are organizing a lockup plan which will reward long-term token holders with interest. We will also have a buyback plan.
12. The recent crash as seen most projects get destroyed in terms of value, it is very obvious however that projects with real use cases for their tokens have fared significantly better (BNB for example)
What are the most immediate real use cases for a public blockchain’s token that can give it some protection from such wild fluctuations in the future?
Conversely, in the next bull market, what features do you believe will provide the most value to a public blockchain and it’s stable growth in price?
Answer: eeaassssy (Overseas community manager of NULS)
Features that will provide adoption, NULS is building an enterprise on-ramp to make it as easy as possible for anyone to create a blockchain. We are still at a very low rate of adoption so any project related to that will do very well.
Answer: Roy_Ruff (Ruff Chain CEO)
I still remember when Symbian was invented in 1999 and Android was first introduced in 2003, yet we have the first Android-based HTC cell phone in 2009, you know when you download your first android app. An app ecosystem takes time. The decentralized app will be proven to be useful, our main concern is when. What I can see from the community is that gambling apps, wallets, dex are growing rapidly with their active user groups. Suppose the token users expand 10x or 100x, the DAU of those apps can easily reach 10k-100k, which may make DApps phenomenal.
13. For Nebulas: what type of data in the blockchain world is in the most immediate need of value ranking? And are the other members of the PCTA planning on incorporating NAS’s value ranking algorithm to improve the usability and findability of their own blockchains? — if so, how will the look in the real world?
Answer: hitters_xu (Nebulas founder)
Thanks for your care for Nebulas. The basic unit of blockchain should be Addresses. Just like Google’s “pagerank” ranks the value of each single “page”, we think the value ranking for the addresses will be of significant importance for blockchain world. The PCTA is an open alliance and alliance members will share each other’s views, display each others’ strength on blockchain technology and jointly explore for the development of blockchain technology. This is NAS’s value proposition in one case, but it will definitely be far beyond this too. Also, the NAS value ranking algorithm is not only for the PCTA partners. We have already have the NR algorithm open-sourced and also opened the API for the community and NAS partners. In the coming Nebulas NOVA, we will have the algorithm on-chain and start to run the Developer Incentive Protocol (DIP) based on NR onc-hain, stay tuned!
14: What consensus algorithm does NAS use?
Answer:longinus8941 (Senior researcher of Nebulas Research Institute)
Hi, this is Dr. Tang Zaiyang from Nebulas Research Institute. Now the consensus protocol of Nebulas is DPoS. According to the Nebulas roadmap, DPoS is going to be replaced by Proof-of-Devotion in the end of 2019, which is designed to ensure the security and fairness both.
(welcome to follow @BitsclubPCTA on Twitter! And PCTA Reddit Channel!)
15: With regards to the PCTA, what are the most important data points that need to be shared and collaborated on within the group for the maximum benefit of all members moving forward?
Answer: hitters_xu (Nebulas founder)
The most important part for PCTA is open, especially for public chain projects, public chains should be inclusive. Ever since early this year, we’ve seen public chains are competing hard especially for DApps and developers, they want developers to become “married” to their blockchain, so that those developers can only focus development on a single chain. But this is definitely not an optimal for the developers, what they want is users, so they will move to pursue the most users and the most active ecosystem.
That’s also one of the reasons why we would like to initiate the PCTA. In terms of data sharing within the alliance. Actually, data on public chains is open for everybody, but when we would like to form an open ecosystem and prepare for a larger user field, the data among various chains need to be compatible. So one thing PCTA is working on is to share our views on the current blockchain technologies and leverage each other’s advantages, seek to form a compatible ecosystem, where developers could play around easily, users could move around easily, and the data among various chains could be measured under the same standard.
