These Types of Indicators Will Help You Organize Your Analysis of Crypto-Assets
The analysis of crypto-assets relies on two fundamental types of data sources:
1) Exchange Order-Books: Data sources that provide price, volume and relevant information about trades and orders for specific crypto-assets.
2) Blockchains: Data sources that provide information about the network behind a specific crypto-asset as well as financial activity such as mining, payments, transfers or other elements that fall outside traditional trading mechanics.
There are other data sources that, under certain market conditions could be relevant to analyze the behavior of crypto-assets.
3) Social Media: Twitter, Telegram, news sources could play a significant role describing the market sentiment towards a specific crypto-assets.
4) Financial Markets: Datasets about traditional financial markets such as equities or commodities that can be used for macro-analysis of crypto markets.
There are many different types of indicators that are relevant to analyze the behavior of crypto-assets. Some of those groups of indicators are variations of traditional technical or quant metrics that factor in specific elements of crypto-assets. Others, however, are completely tailored to crypto as a new asset class.
Trend
Trend indicators are designed to show traders and investors the trend or direction of the asset they are trading. The trend of an asset can be either downwards (we are talking here about bearish trend), upwards (bullish trend) or sideways (no clear direction).
· Traditional Trend Indicator: Moving Average Convergence Divergence (MACD) is typically used to reveal changes in the strength, direction, momentum, and duration of a trend in the price of a crypto-asset.
· Crypto-Specific Trend Indicator: A hash rate moving average that evaluates trends in the hash rates of a given crypto network.
Volume
Volume indicators provide metrics about the number of contracts traded for a specific asset. These type of indicator is often used confirm or infirm a continuation or change in the direction of a crypto-asset trend.
· Traditional Volume Indicator: The On-Balance Volume (OBV) indicator represents market volume linked with increases in the price, indicating that every time that the volume and price rise simultaneously, the price is probably being bought by the institutional investor, not the retailer.
· Crypto-Specific Volume Indicator: IntoTheBlock’s Large Transactions Volume indicator measures the volume of large transactions over time signaling a potential trend within large investors in a crypto-asset.
Momentum
Momentum indicators typically measure the strength and speed of a specific parameter(typically price) in a crypto-asset. Momentum metrics differs from trend indicators in the sense that they don’t necessarily focus on historical patterns.
· Traditional Momentum Indicator: The Relative Strength Index (RSI) measures recent trading strength, velocity of change in the trend, and magnitude of the move on the price of a crypto-asset.
· Crypto-Specific Momentum Indicator: IntoTheBlock’s In The Money Momentum indicator measures the percentage of investors in a crypto asset realizing gains over certain periods of time signaling objective levels of liquidity, support and resistance.
Volatility
Volatility indicators measure the rate of price movement, regardless of direction. A high volatility occurs when the price moves up and down quickly over a short period. If the price moves slowly then we can consider that is has a low volatility.
· Traditional Volatility Indicator: The Bollinger Bands indicator measures the “highness” or “lowness” of price, relative to previous trades in a crypto-asset.
· Crypto-Specific Volatility Indicator: IntoTheBlock’s Large Transactions signals can provide indicators of volatility related to large investors.
Network
Network indicators are very specific to crypto-assets and describe patterns of network growth for a specific crypto-asset. These type of indicators are important as crypto-assets are typically vulnerable to the behavior of the underlying networks.
· Crypto-Specific Network Indicator: IntoTheBlock’s Net Network Growth indicator uses a predefined time-frame to measure the difference between new addresses coming into the network and those whose balance goes to zero. Similarly, the East-vs-West network indicator measures transactions in Asia vs. the rest of the world.
Protocol
Protocol indicators measure the behavior of the protocols underneath a crypto-asset. These indicators provide intelligence about aspects such as token releases, forks etc.
· Crypto-Specific Network Indicator: Indicators that measure metrics about treasury management or release schedules can be relevant metrics to forecast the behavior of cypto-asset.s
There are no well-establish methodologies for analyzing crypto-assets and many of these ideas are likely to change/evolve in the future. However, having a structured framework that help us think through different patterns and understand how different indictors relates to each other is still an important step towards the creation of more robust analysis methodologies.
Published at Thu, 10 Oct 2019 13:57:05 +0000
{flickr|100|campaign}
