Coinscious Market Report
by Coinscious Lab
January 21, 2019
30d % Gain
Biggest 30d %
Data & Information
30d % Loss
Bitcoin Cash (BCH)
Biggest 30d %
Released bi-weekly, this report aims to identify broad trends in the cryptocurrency market. In order to reflect the latest developments in this fast-paced and volatile market, the reports plan to focus on metrics derived from a 30-day rolling window of data, this time from December 22, 2018 to January 20, 2019.
Our universe of analysis includes 51 of some of the most widely used and traded cryptocurrencies, and groups them into sectors that reflect similar utility and valuation models. Through analysis of the recent historical performance of individual cryptocurrencies as well as their sectors, we provide a framework for analysis where investors can identify outperforming cryptocurrencies or sectors by comparing their performance relative to peers.
|Digital Cash||BTC, BCH, BSV, LTC, BTG, DOGE, DCR, BCD, DGB|
|Privacycoins||XMR, DASH, ZEC, XVG|
|DApp Platforms||ETH, EOS, ADA, NEO, ETC, XEM, XTZ, QTUM, LSK, AE, ZIL, ICX, BTM, ETP|
|Payments and Settlements||XRP, XLM, OMG, NPXS, MKR, PPT|
|Decentralized Exchanges||BTS, ZRX, WAVES|
|Digital Content||TRX, ONT, BAT, STEEM|
|Data and Information||IOTA, VET, LINK, REP|
|Stablecoin||USDT, TUSD, DAI|
The performance of major cryptocurrencies over the past month has been mixed, with 12 out of the 51 cryptocurrencies that we examined up from their values 30 days ago. Bitcoin (BTC), the largest cryptocurrency by market cap, has been confined between $3500 and $3900 since January 11, and is currently trading at the low end of that range around $3600. Outside of cryptocurrencies, the S&P 500 has been performing well, up 10.51% from 30 days ago and closing last Friday at $2670.71.
Figure 1 presents the risk versus return trade-off over the past 30 days by plotting mean daily return versus historical daily volatility for various cryptocurrencies.
Figure 1. Plot of mean daily return against historical daily volatility for individual cryptocurrencies from December 22, 2018 to January 20, 2019. Higher returns at a given level of risk, measured through historical daily volatility, indicates a better investment.
The best performer overall over the past month was Augur’s reputation token (REP), with a total return of 135.34%. The surge in price can be attributed to the announcement of the Viel platform on January 15. Viel is a peer-to-peer trading platform for prediction markets and derivatives built on top of Augur, with the goal of making Augur easier to use and more ubiquitous by making transactions faster and cheaper. Reputation is in the data and information sector, as was the second best overall performer, ChainLink (LINK), which had a total return of 59.72%. Other cryptocurrencies in the data and information sector are IOTA (IOTA) and VeChain (VET).
Bitcoin Cash (BCH) was the worst performing cryptocurrency, with total losses of 33.31%. Bitcoin SV (BSV) was the second weakest, with total losses of 30.32%. Bitcoin Cash and Bitcoin SV both belong to the digital cash sector.
Cobra, the anonymous developer who founded Bitcoin.org, tweeted on January 18, “Bitcoin Cash is dead.” Cobra goes on to claim that Bitcoin Cash needs new leadership, otherwise it’ll be worth $0 in a few years. Cobra also tweeted about Bitcoin SV a little further back on January 7, saying, “Time to sell all my BSV. Worthless shitcoin.” Another high profile member of the cryptocurrency community, Vitalik Buterin, founder of Ethereum, was also critical of Bitcoin SV on Twitter and called it “a pure dumpster fire.”
The tweets don’t appear to coincide with any noticeably large drops in either Bitcoin Cash’s or Bitcoin SV’s prices. Rather, both of them had gradual declines over the past month that fit into a longer term downtrend. However, the negative attention as a result of these tweets is unlikely to present a good opportunity to reverse that downtrend anytime soon.
Several other cryptocurrencies in the digital cash sector, namely Dogecoin (DOGE), Bitcoin (BTC), Bitcoin Gold (BTG), and Bitcoin Diamond (BCD), also had negative returns over the past month.
Figure 2 shows various performance measures of the nine sectors as well as that of the S&P 500 for comparison and Figure 3 plots the performance over time of each sector. Performance between the sectors was mixed, with total returns ranging from -13.81% (digital cash) to 44.42% (data and information). Data and information was also the best performing sector in our previous market report from two weeks ago.
Figure 2. Mean daily returns, historical daily volatility, total returns, maximum drawdown, and ex-post Sharpe ratio for each sector from December 22, 2018 to January 20, 2019. Less negative maximum drawdowns and more positive Sharpe ratios are more desirable. The Sharpe ratio is calculated with the 10 year US Treasury bill rate as the annual risk-free rate
Figure 3a. Price performance over time by sectors that had positive returns between December 22, 2018 to January 20, 2019
Figure 3b. Price performance over time by sectors that had negative returns between December 22, 2018 to January 20, 2019.
Figure 4 shows the correlation between the daily returns of each sector and quantifies some of what we visually observe from Figure 3. Stablecoins had moderate negative correlation with other sectors. As shown in Figure 2, stablecoins continued to fulfill their intended purpose well by maintaining low volatility and mean daily returns near 0%, and a near zero total return of -0.73% over the observation period. As for the other sectors, despite their varying performance, they still had high positive correlation with each other, ranging from 0.77 to 0.97. This is visible is Figure 3 from how sectors often moved up or down together on the same days. The S&P 500 had little correlation with any cryptocurrency sectors.
Figure 4. Correlation between daily returns of each sector from December 22, 2018 to January 20, 2019. Correlation ranges between -1 and 1. Correlation close to 1 indicates a more positive relationship between the pair of cryptocurrency returns and correlation close to -1 indicates a more negative linear relationship. Correlation close to 0 indicates no linear relationship.
The daily price data of cryptocurrencies in USD at 4:00 PM EST from December 22, 2018 to January 20, 2019 was used for our calculations.
The prices are the volume weighted average price of the cryptocurrency in USD at 4:00 PM EST each day across all exchanges where Coinscious has data. If there was insufficient good quality data on a cryptocurrency’s value in USD, we would instead use the cryptocurrency’s value in USDT and apply a conversion rate to turn it to USD. If data was still insufficient, then we would find the volume weighted average price of the cryptocurrency in both BTC and ETH, then converted both into USD, and finally took the mean of those values. The conversion rates we use at a given time are the volume weighted average price of USDT, BTC, or ETH to USD at that specific time across all exchanges where Coinscious has data.
To analyze performance by sector, the prices of constituent cryptocurrencies was normalized by dividing by the price on December 22, 2018, then averaged. When calculating the daily returns using this averaged normalized price, it is equivalent to if each sector was represented as an equally weighted portfolio of its constituent cryptocurrencies formed starting December 22, 2018 and the returns of the portfolio were calculated. Returns used throughout this report refer to simple returns.
Daily closing price data of the S&P 500 index from Yahoo Finance was also used as a proxy to represent the US equity market. The latest 10 year US Treasury bill rate from YCharts was used for calculations involving a risk-free rate.
In subsequent reports, we may update our universe, sectors, methodology, and analysis to reflect new developments.
- Volatility: A measure of the dispersion in the trading price of an instrument over a certain period of time, defined as the standard deviation of an instrument’s returns.
- Drawdown: A measure of the decline of the trading price of an instrument or investment since the previous peak during a certain period of time. Less negative, less frequent, and shorter drawdowns are more desirable.
- Maximum drawdown: The maximum peak to trough decline of the trading price of an instrument or investment over a certain period of time. Less negative maximum drawdowns are more desirable.
- Sharpe ratio: A risk adjusted measure of return that describes the reward per unit of risk. The reward is the average excess returns of an investment against a benchmark or risk-free rate of return, and the risk is the standard deviation of the excess returns. A higher Sharpe ratio is better. Ex-ante Sharpe ratio is calculated with expected returns whereas ex-post Sharpe ratio is calculated with realized historical returns.
- Correlation: A measure of the linear relationship between two series of random variables, which in the context of finance, can be two series of returns. Correlation ranges between -1 and 1. Correlation close to 1 indicates a more positive relationship between the pair of cryptocurrency returns and correlation close to -1 indicates a more negative linear relationship. Correlation close to 0 indicates no linear relationship.
The information contained herein is for informational purposes only and is not intended as a research report or investment advice. It should not be construed as Coinscious recommending investment in cryptocurrencies or other products or services, or as a solicitation to buy or sell any security or engage in a particular investment strategy. Investment in the crypto market entails substantial risk. Before acting on any information, you should consider whether it is suitable for your particular circumstances and consult all available material, and, if necessary, seek professional advice.
Coinscious and its partners, directors, shareholders and employees may have a position in entities referred to herein or may make purchases and/or sales from time to time, or they may act, or may have acted in the past, as an advisor to certain companies mentioned herein and may receive, or may have received, a remuneration for their services from those companies.
Neither Coinscious or its partners, directors, shareholders or employees shall be liable for any damage, expense or other loss that you may incur out of reliance on any information contained in this report.