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Investigating Disruptive Patterns of Crypto Exchanges

By | Coinscious Lab, Data Analytics | No Comments

Overview

Released monthly, this report aims to analyze and characterize cryptocurrency exchanges according to their volume for the past month, this time from January 16, 2019 to February 16, 2019.

Our universe of analysis uses public exchange data from 18 of some of the most popular exchanges1 (see Figure 1). Through analysis of the recent historical volume and price of individual exchanges we provide a framework for analysis where investors can identify better or fairer exchanges.

Using daily volume data from some of the most widely used cryptocurrency exchanges, we were able to cluster exchanges into three groups based on similarity in volume trends. Some of our findings include the following:

  • Fcoin and HitBTC go against the market both in terms of volume correlation and price-volume correlation.
  • Not only does volume and price seem to go against the market, but returns and volume are positively correlated only for Fcoin and HitBTC, while returns and volume are negatively correlated for the rest of exchanges.
  • Although ZB has reported the biggest traded volume in the past month, ZB volume trend patterns were different from the other top exchanges (Binance, HuobiPro, and OKEx). Generally, it showed a low correlation with the market in terms of traded volume.
  • It is also interesting to note that our analysis (Figure 4b. Top 5 positive correlations) accidentally reveals a shared order book between Upbit and Bittrex.

Performance

Figure 1. Total monthly volume, mean daily volume, max daily volume, mean hourly volume and max hourly volume for each exchange from January 16, 2019 to February 16, 2019 in USD. Monitor exchange performance daily through our Market & Trading Strategy Dashboard: www.dashboard.coinscious.io

According to the public exchange data, ZB has reported the biggest mean daily and hourly volume for the past month. Binance reportedly lost the crown as the king of cryptocurrency by trade volume on December 11, 2018 to be replaced by OKEx, who held the 1st place at that time, while ZB held 2nd [1].

In the past month, ZB has taken the first spot, with a total of 16 billion dollar traded between January 16th to February 16th, compared to 14 billion USD for OKEx (2nd) and Binance (3rd) (see Figure 1).

We then chose ETH/BTC pair to look at the volume more closely and analyze it in more depth. ZB traded volume for ETH/BTC is low during the whole period, with Binance, HuobiPro and OKEx as top exchanges. However, there was a rapid surge on February 11th, when volume changed from $500,000 USD to $67 million USD in one day, and it has remained high since then (see Figure 2). That same day,  according to Etherscan, daily mining rewards for Ethereum fell to their lowest recorded levels [2].

Figure 2. ETH/BTC pair daily volume for each exchange from January 16, 2019 to February 16, 2019 in USD.

Analysis

In order to categorize exchanges and investigate their trends during the past month, we performed a dimensionality reduction analysis using PCA2 for ETH/BTC pair daily volume. By plotting crypto exchanges according to their first two principal components, we could identify a cluster and some outliers (see Figure 3). The two first principal components explain more than 80% of the variance in our data set and the relative position along the x and y axis indicates similarity between exchanges in terms of traded volume. Thus, exchanges clustered together present similar volume trends, while outliers, namely Okex, HuobiPro, Binance, Fcoin, HitBTC, and ZB, show trends that diverge from the market mean.

Figure 3. PCA Volume analysis for ETH/BTC. The biplot, where the two main principal components are used to represent the exchanges allows us to identify clusters or groups of exchanges that might be correlated according to volume.

To understand the meaning of the two principal components and characterize the outliers, we decided to look at correlation between exchanges using volume for the ETH/BTC pair, to identify a general trend in the market and whether exchanges follow or are against the trend (see Figure 5). Although most exchanges show a similar trends (this is, they follow a similar daily volume trend), Bitflyer, ZB, Zaif, Fcoin, and HitBTC show a daily volume trend that goes against the market.

Figure 4a. Top 5 negative volume correlations

Figure 4b. Top 5 positive volume correlations

Figure 5. Daily volume correlations between exchanges from January 16, 2019 to February 16, 2019 for ETH/BTC. 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.

Fcoin in particular shows negative correlations with all exchanges except for HitBTC. This suggests that Bitflyer, ZB, Zaif, Fcoin, and HitBTC are acting against the market. Moreover, it’s interesting to see that Bitflyer, ZB, Zaif, Fcoin, and HitBTC are all based in Asian countries.

On the other hand, Upbit and Bittrex show the highest correlation for all exchange pairs. This similarity in volume is in line with reports suggesting that they share the same order book, although further analysis of blockchain data will be needed to confirm these claims [3].  

To explore what other factors could contribute to the clustering in different groups after Volume PCA, we calculated the correlation between ETH/BTC price and volume for every exchange pair (see Figure 6).

Figure 6. Daily price-volume correlations between exchanges from January 16, 2019 to February 16, 2019 for ETH/BTC. 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.

Again, Fcoin stands out as the exchange with a highest negative correlation between ETC/BTC price and volume for all exchanges showing that, not only the volume, but ETH price is also against the market3. While most exchanges show a positive trend, with high volumes associated to higher prices, Fcoin shows a negative trend, where higher volumes during the analyzed period are associated with lower prices and vice versa.

This raised suspicions that Fcoin might be manipulating price and volume, especially for the pair that we have analyzed (ETH/BTC). Fcoin has been accused of manipulation in the past. In September, a Chinese investor filed a complaint against the exchange, which presumably induced sudden drops in price through manipulation after investing huge amounts in Fcoin token [4].

Finally, if we look at the correlation between returns (instead of price) and volume for ETH/BTC (Figure 7), HitBTC and Fcoin are again the exchanges going against the general trend. High returns in HitBTC and Fcoin are associated with an increase in volume, while high returns elicit a decrease in volume for the rest of exchanges (negative correlation between returns and volume). Interestingly, HitBTC has also been accused of volume manipulation [5].

Figure 7. Daily returns-volume correlations between exchanges from January 16, 2019 to February 16, 2019 for ETH/BTC. 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.

Summary

Using daily volume data from 18 of some of the most widely used cryptocurrency exchanges and principal component analysis, we identified three clusters of exchanges sharing similar volume trends. We mainly looked at volume correlations and price-volume correlations. Our findings include:

  • Fcoin and HitBTC go against the market both in terms of volume correlation and price-volume correlation.
  • Not only volume and price seem to go against the market, but returns and volume are positively correlated only for Fcoin and HitBTC, while returns and volume are negatively correlated for the rest of exchanges.
  • Although ZB has reported the biggest traded volume in the past month, PCA analysis separates it from the other top exchanges (Binance, HuobiPro, and OKEx) and show a low correlation with the market in terms of traded volume.
  • It is also interesting to note that our analysis (Figure 4b Top 5 positive correlations) accidentally reveals a shared orderbook between Upbit and Bittrex

Here, these findings are simple observations of possibly correlated variables. We share this from the point-of-view of something to look out for. Overall, our exchange analysis has proven useful to study patterns of volume and price activity in the market and identify potential manipulation, that could be confirmed using blockchain data.

Footnotes

1 The scope of this report does not cover futures contracts.

2 PCA is a technique that finds underlying variables that best differentiates your data points. In this article, we visualize and analyze along the two dimensions which the data points varies the most (see Appendix B).

3 Here, the market is refers to the trend of majority of the exchanges.

APPENDIX A: Methodology

The daily volume of cryptocurrencies in USD at 4:00 PM EST from January 16, 2019 to February 16, 2019 was used for our volume ranking. Daily volume and price for the pair ethereum_bitcoin was used for the same time period for the PCA analysis and correlation analysis. Price and volume were normalized such that its distribution had mean value 0 and standard deviation of 1 in order to perform principal component analysis and calculate price-volume correlations. In subsequent reports, we may update our universe, sectors, methodology, and analysis to reflect new developments.

APPENDIX B: Terminology

  • 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.
  • PCA: A statistical procedure that uses an orthogonal transformation to convert a set of observations of possibly correlated variables into a set of values of linearly uncorrelated variables called principal components, in order to maximize the explained variance.

References

[1] T. (2018, December 11). Binance Losses Top Cryptocurrency Exchange Position to OKEX and ZB.Com. Retrieved from https://coingape.com/

[2] Lavere, M. (2019, February 13). Ethereum (ETH) Mining Reward Hits Lowest Ever.  Retrieved from https://ethereumworldnews.com/

[3] Bitking74. (2017, October 24). UPbit and Bittrex are sharing the same order book. This is a win win for both sides: bring some Korean liquidity to Bittrex, also the Korean users start with nicely filled order books from Bittrex. Go NEO. Neotrader [Online forum]. Retrieved from https://www.reddit.com/r/Neotrader/comments/78fztu/upbit_and_bittrex_are_sharing_the_same_order_book/

[4] J. (2018, September 18). Chinese Investor Loses 700,000 Yuan Due To Fcoin Crypto Manipulation. Retrieved from https://www.coindaily.co/

[5] Sillers, A. (2018, September 12). The evidence of OKex’s fraudulent behavior, which may point to HitBTC as well. Retrieved from https://www.chepicap.com/

Disclaimer

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.

🚦Ready, Set, Crypto

By | News | No Comments

⛔ CBOE Discontinues Bitcoin Futures

WEDNESDAY, MARCH 20, 2019

The Chicago Board Options Exchange (CBOE), the first exchange to list bitcoin futures, has decided to stop listing the very same product. CBOE stated that it has not fully closed the door on cryptocurrency, but does not intend to list additional bitcoin futures for trading at the moment due to decreased demand.

SOURCE: FORBES


📈 Coinmarketcap Launches Crypto Indices on Nasdaq, Bloomberg and More

WEDNESDAY, MARCH 20, 2019

CoinMarketCap, announced it will launching two cryptocurrency benchmark indices on Nasdaq Global Index Data Service (GIDS), Bloomberg Terminal, Thomson Reuters Eikon (Refinitiv), Germany’s Börse Stuttgart, and its own platform. The indices cover the top 200 by market capitalization. The first index, CMC Crypto 200 Index (CMC200), includes bitcoin and covers more than 90% of the cryptocurrency market. The second index, CMC Crypto 200 ex BTC Index (CMC200EX) does not include bitcoin, in order to track market performance without its influence. 

SOURCE: COINDESK


⚡ Huobi Launches Token Sale Platform

WEDNESDAY, MARCH 20, 2019

Singapore cryptocurrency exchange, Huobi Global, announced on its blog that Huobi Prime, a dedicated token sale platform. The new platform is geared towards both large and small investors and allows individuals access to new altcoin tokens before they appear on major exchanges. The first project to launch is TOP and will take place on March 26, 2019

SOURCE: COINTELEGRAPH


🚦 Cryptopia’s Trading Service Resumes After Hack

WEDNESDAY, MARCH 20, 2019

New Zealand cryptocurrency exchange, Cryptopia, announced it is resuming its trading service after its hack mid-January. An estimated of 9.4% of the exchange’s total holdings were stolen. Currently, 40 trade pairs have been evaluated as secure and this list will continue to grow as Cryptopia clears more coins. See the full list: here

SOURCE: COINDESK


🇦🇺 Purchase Bitcoin Down Under With Binance Lite

TUESDAY, MARCH 19, 2019

Cryptocurrency exchange, Binance, has expanded its Binance Lite fiat gateway to Australia. 1,300 newsagent stores will be ready and allow customers to buy cryptocurrency with regular fiat money. In order to use this service, customers will need to pass account verification, including Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures.

SOURCE: THENEXTWEB


🇨🇭 Switzerland’s Largest Online Retailer Accepts Bitcoin

TUESDAY, MARCH 19, 2019

Digitec-Galaxus, Switzerland’s “Amazon”, is now accepting bitcoin (BTC) and other cryptocurrencies as payment. Co-founder & Chief Innovation Officer, Oliver Herren, says the company’s move to accept this form of payment method is to target a more tech-savvy audience and position itself as a forward-thinking company. The large online retailer has partnered with Coinify to process all cryptocurrency transactions. 

SOURCE: BITCOINIST


💳 Fortune 500 Company Accepts Crypto Payments

TUESDAY, MARCH 19, 2019

Fortune 500 company Avnet, one of the largest electronic components distributors worldwide, announced it will now accept bitcoin (BTC) or bitcoin (BCH) as payments for its products and services. Avnet partnered with payment platform, BitPay, who will aid with verifying funds, processing orders, and completing transactions.

SOURCE: ETHNEW


🚀 IBM Signs 6 Banks Ready To Issue Stablecoin

MONDAY, MARCH 18, 2019

IBM officially launches its real-time global payments network, Blockchain World Wire (BWW), in collaboration with Stellar (XLM) is now live. IBM and Stellar announced that six international banks have signed up to issue their own stablecoins on the blockchain-powered payments network. BWW currently supports more than 47 currencies for payments across 72 countries.

SOURCE: COINTELEGRAPH


✋ Bitcoin Futures On the Bakkt Burner

MONDAY, MARCH 18, 2019

The highly anticipated bitcoin futures market, Bakkt, by Intercontinental Exchange (ICE) has yet to receive regulatory approval from the Commodity Futures Trading Commission (CFTC). ICE originally intended to launch the platform in mid-December, but has since delayed the project indefinitely.

SOURCE: COINDESK


🐋 Blockchain Watch: Whale Hello There

WEDNESDAY, MARCH 20, 2019
TUESDAY, MARCH 19, 2019
MONDAY, MARCH 18, 2019

SOURCE: TWITTER


Images courtesy of Shutterstock

🚀 Crypto Launches & Previews

By | News | No Comments

🚫 Bittrex Cancels Its First Initial Exchange Offering

FRIDAY, MARCH 15, 2019

Crypto trading platform, Bittrex International, has cancelled its first public Initial Exchange Offering (IEO) for RAID tokens intended to take place today.  The decision came after Bittrex learned startup RAID ended its vital partnership with e-gaming data analytics company, OP.GG. In a swift move to protect its users, the IEO to raise $6 million dollars was cancelled hours before its launch. It still remains unclear the true relationship between RAID and OP.GG as statements from both parties conflict one another. 

SOURCES: CCN, BITTREX


⚖ Mt. Gox CEO Receives Suspended Jail Term

FRIDAY, MARCH 15, 2019

The Tokyo District Court found Mark Karpeles, the former CEO of the now dissolved cryptocurrency exchange, Mt. Gox, guilty of tampering financial records, but innocent of embezzlement and breach of trust. Karpeles was given a suspended sentence of two and a half years, and will not have to serve jail time provided he does not commit another violation within 4 years. 

SOURCE: BLOOMBERG


🤐 SEC Not Likely to Approve Bitcoin ETF Any Time Soon

FRIDAY, MARCH 15, 2019

During CoinDesk’s Consensus: Invest event yesterday, Jay Clayton, the chairman of the United States Securities and Exchange Commission (SEC) highlighted key stances U.S. regulators currently have on the cryptocurrency space. Major takeaways from Clayton’s panel discussion include:

  1. bitcoin exchange traded funds (ETF) not likely to be approved soon
  2. regulated exchanges are needed to prevent price manipulation
  3. crypto trading requires anti-money laundering protections
  4. ICO-funded startups should go see the SEC, and
  5. courts may see ICO’s differently than regulators.

SOURCE: COINDESK


💵 USDT Not Entirely Backed By Fiat

THURSDAY, MARCH 14, 2019

Tether has quietly updated their website terms stating that the dollar-peggedstablecoin, USDT, is backed 100% by “reserves”, not only fiat. These reserves collectively consist of traditional currency, cash equivalents, and other assets and receivables from loans made by Tether to third parties. 

SOURCE: COINDESK


📈 Nasdaq Licences Framework to Cryptocurrency Ecosystem Developer

THURSDAY, MARCH 14, 2019

Nasdaq, has licensed its Nasdaq Financial Framework to Bcause, a cryptocurrency trading platform. Bcause will leverage Nasdaq’s technology for its spot trading activities such as clearing and “market surveillance.” Bcause’s spot market is set to launch during H1 2019.

SOURCE: BITCOIN.COM


🕒 Thai Stock Exchange To Launch Digital Asset Platform in 2020

THURSDAY, MARCH 14, 2019

The Stock Exchange of Thailand (SET) confirmed it is building a digital assets platform that is set to launch in 2020. President of SET, Pakorn Peetathawatchai, advised the platform is part of their 3-year strategic plan between 2019-2021, focusing on developing infrastructure and a “one stop” digital capital market. 

SOURCE: COINTELEGRAPH


🚀 Coinbase Pro Lists Stellar Lumens

THURSDAY, MARCH 14, 2019

Coinbase Pro has added support for Stellar Lumens (XLM), the eight largest cryptocurrency by market capitalization. XLM trading will go through three stages – “transfer-only,” “post-only,” and “limit-only.” – before the fourth “full trading” stage commences. More details can be found on their official blog post

SOURCE: COINTELEGRAPH


➡️ Coinbase Completes First OTC Trade From Cold Storage

WEDNESDAY, MARCH 13, 2019

Coinbase Custody has successfully conducted its first over-the-counter trade (OTC) directly from cold storage. On their blog, the cryptocurrency exchange stated that Custody is now directly integration with the OTC desk at Coinbase Pro and allowed for the completion of the OTC trade. Coinbase’s OTC desk launched quietly last year and its services are offered to accredited investors in the U.S., Asia, and Europe.

SOURCE: BITCOINEXCHANGEGUIDE


⚖ QuadrigaCX’s CEO Used Personal Funds During 2018 Litigations

WEDNESDAY, MARCH 13, 2019

Gerald Cotten’s widow, Jennifer Robertson, revealed that the CEO of the Canadian crypto exchange, QuadrigaCX, had put personal funds into the exchange during its legal battle with the Canadian Imperial Bank of Commerce (CIBC) in 2018. The major bank froze five accounts holding a total of $21.6 million and as such Cotten needed a way to fund customer withdrawals. 

SOURCE: COINDESK


💳 Binance’s Trust Wallet Now Supports XRP & Credit Card Payments

TUESDAY, MARCH 12, 2019

Trust Wallet, the official wallet of cryptocurrency exchange, Binance, now supports Ripple’s XRP token and credit card purchases. The wallet also currently supports bitcoin (BTC), ethereum (ETH), litecoin (LTC), bitcoin cash (BTC) as well as ethereum-based tokens such as ERC20, ERC223 and ERC 721. Users can now buy crypto directly with their credit cards, with payment being processed by Simplex. More details to be revealed on which major credit and debit cards will be accepted and if there are any fees associated.

SOURCE: COINTELEGRAPH


💰 Bittrex To Conduct Its First Initial Exchange Offering

TUESDAY, MARCH 12, 2019

Crypto trading platform, Bittrex International, will be launching its first public Initial Exchange Offering (IEO) through its platform on Friday, March 15. Bittrex users will be able to use bitcoin (BTC) to purchase RAID (XRD) tokens. There will be a hard cap of 17 billion XRD, worth $6 million dollars. RAID is a South Korean startup that is developing a blockchain-powered game data ecosystem. Full details of the IEO can be found here

SOURCES: CHEPICAPBITTREX


🛡 SEC Agrees With Analysis: Ether Is Not A Security

TUESDAY, MARCH 12, 2019

U.S. Security and Exchange Commisison (SEC) chairman, Jay Clayton, confirms staff analysis that ethereum and similar decentralized digital assets are not securities. In a letter to U.S. House representative, Tedd Budd, Clayton did not directly reference any specific cryptocurrencies, but rather stated he agreed with William Hinman, the SEC Director of Division of Corporate Finance, and his securities classification of crypto assets from June 2018.

SOURCE: CCN


🔒Ledger Reports On Trezor Wallets Vulnerabilities

MONDAY, MARCH 11, 2019

Ledger, the French hardware wallet manufacturer, released a report on the vulnerabilities of wallets from its direct competitor, Trezor. The report investigates the weaknesses of wallets Trezor One and Trezor T and highlights features that them susceptible to cyberattacks. The five vulnerabilities analyzed are: 

  1. Genuineness of the device
  2. Secure PIN protection
  3. Confidentiality of data inside the Trezor One
  4. Confidentiality of data inside the Trezor T
  5. Analysis of the cryptographic stack

SOURCES: COINTELEGRAPHLEDGER


💸 Kakao’s Blockchain Unit Raises $90M

MONDAY, MARCH 11, 2019

Ground X, the blockchain unit of South Korean messaging giant, Kakao Corp ,raised $90 million dollars through a private coin offering. Ground X has partnered with 26 companies – including game developer Wemade, video-streaming service Watcha, and unit of travel agency Zanadu – to run applications on their platform. The platform is set to launch in June. 

SOURCE: COINDESK


💸 ‘Facebook Coin’ Could Generate $19B Revenue

MONDAY, MARCH 11, 2019

Barclays’ analyst, Ross Sandler, says the launch of Facebook’s digital currency, Facebook Coin, could add $19 billion dollars in revenue by 2021.  Sandler asserts that this will be a huge opportunity for the company to grow especially with the inclusion of a payment method for its premium content. Facebook currently has 3 million users, but the crypto community remains divided by the social media giant’s potential launch into the crypto space.

SOURCE: NEWSBTC


⚡Blockchain ETF Live on London Stock Exchange

MONDAY, MARCH 11, 2019

Invesco, partnered with London-based investment firm, Elwood Asset Management, to launch a blockchain exchange traded fund (ETF) on the London Stock Exchange. The new product, “Invesco Elwood Global Blockchain UCIT ETF,” targets companies with potential to generate real earnings from blockchain technology. 

SOURCE: COINDESK

Image courtesy of Wealth Management


📱Samsung Galaxy S10 Wallet Supports ETH, ERC20 Tokens, dApps, But Not BTC

MONDAY, MARCH 11, 2019

 The Samsung Blockchain Wallet on the upcoming Galaxy S10 phone will not support bitcoin (BTC), despite pre-released images. Currently, the native wallet is only compatible with ethereum (ETH) and other ethereum-based ERC20 tokens. At launch, the wallet will also support 4 decentralized apps: Enjin, Cosmee, CryptoKitties, and CoinDuck

SOURCE: COINDESK


📈  SIX May Soon List Ripple (XRP) ETP

MONDAY, MARCH 11, 2019

Swiss stock exchange, SIX, may soon introduce ripple (XRP) exchange-traded product (ETP) following the now live bitcoin ETP and ethereum ETP tickers, ABTC and AETH, respectively. Amun AG, the crypto firm responsible for the existing crypto ETP listings on SIX, say they’re optimistic XRP ETP will be launched within the next two months under the ticker AXRP.

SOURCE: CHEPICAP


🐋 Blockchain Watch: Well, Well, Whale

FRIDAY, MARCH 15, 2019
THURSDAY, MARCH 14, 2019

Over 27.9M XRP moved worth $8.8 million dollars

WEDNESDAY, MARCH 13, 2019
TUESDAY, MARCH 12, 2019
MONDAY, MARCH 11, 2019

SOURCE: TWITTER


Images courtesy of Shutterstock

MKR Outperforms in Feb (86% Gains); ONT & BAT Take 2nd & 3rd

By | Coinscious Lab, Data Analytics | No Comments

Coinscious Market Report

by Coinscious Lab

March 4, 2019

Biggest
30d % Gain

Maker (MKR)
+85.56%

Biggest 30d %
Gain (Sector)

Digital Content
+37.38%

Biggest
30d % Loss

Augur (REP)
12.71%

Biggest 30d %
Loss (Sector)

Stablecoins
-0.14%

Overview

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 February 2, 2019 to March 3, 2019.

Our universe of analysis includes 50 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.

Sector
Constituent Coins/Tokens
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
Resources SC, GNT
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

Analysis

The performance of major cryptocurrencies over the past month has been good, with 44 out of the 50 cryptocurrencies that we examined up from their values 30 days ago. Bitcoin (BTC), the largest cryptocurrency by market cap, is trading between $3800 and $4000. Despite having surpassed $4000 two weeks ago, giving many hope that this breakout was potentially the start of a new upwards trend, Bitcoin reached and was rejected by the $4250 resistance level. It continues the longstanding sideways trend that began in November last year.

Outside of cryptocurrencies, the S&P 500 has been performing well, up 3.59% from 30 days ago and closing last Friday at $2803.69.

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 February 2, 2019 to March 3, 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 Maker (MKR), with a total return of 85.56%.  To understand why Maker have outperformed other cryptocurrencies, we need to briefly explain how Maker works first. (For a  full explanation, see their whitepaper.)

MakerDAO is a smart contract platform that backs and stabilizes the value of Dai (DAI), a soft-pegged stablecoin. Unlike most other stablecoins, Dai is collateralized with Ether on the Ethereum blockchain rather than any fiat currency. On this platform, Maker serves multiple purposes:

  • Maker is a governance token that allows holders to vote on system settings
  • Maker is also a utility token that is burned as a fee when settling a Collateralized Debt Position (CDP), a smart contract whose purpose is to create Dai in exchange for collateral, which it then holds in escrow until the borrowed Dai is returned.
  • In the event that CDPs become undercollateralized, likely as a result of market crashes or other adverse events, automatic recapitalization through forced Maker dilution will happen i.e. Maker tokens will be created and sold on the market to raise money to recapitalize the system.

According to an article from MakerDAO’s blog in early February, there are 8200 unique addresses with a non-negligible Dai balance and in January, there were more than 7300 active addresses sending or receiving Dai. In addition, they reported 20% monthly growth in both holders and active addresses.

As the only token that can be used to pay the fee associated with creating Dai and using CDPs, an increase in adoption and demand for Dai means that there will also be additional demand for Maker. In addition, Maker is burned to pay the fee, thereby permanently decreasing the total supply of Maker available (unless more is created during forced Maker dilution for recapitalization). If adoption of Dai continues to grow, as MakerDAO has reported, then there are fundamental reasons to expect the price of Maker to continue to increase as well.

The second and third best performing cryptocurrencies were Ontology (ONT) and Basic Attention Token (BAT) with total returns of 63.94% and 58.31% respectively.

Ontology’s price surge coincides with an article from their blog posted on February 23 that announced the release of the Ontology Development Platform on Google Cloud Platform Marketplace. This makes Ontology one of the first public blockchains to have a development platform on the leading cloud provider marketplaces: Google Cloud, Amazon Web Services, and Microsoft Azure.

Basic Attention Token also benefited from positive news. An article from their blog posted on February 26 announced a partnership between Brave Software and the Tap Network. Brave Software is a privacy browser combined with a blockchain based digital advertising platform that uses Basic Attention Tokens to reward users for their attention. Tap Network is an advertising and data network that connects brands to reward consumers directly using blockchain. This partnership will allow Brave users to redeem Basic Attention Tokens for real-world rewards from over 250 000 brand partners in the TAP Network.

Augur’s reputation token (REP) was the worst performing cryptocurrency, with total losses of 12.72%. This is likely only a pullback from the exuberance that followed the unveiling of the Viel Platform on January 15.

Figure 2a. Cryptocurrencies with the highest total returns from February 2, 2019 to March 3, 2019

Figure 2b. Cryptocurrencies with the lowest total returns form February 2, 2019 to March 3, 2019

Figure 3. Mean daily returns, historical daily volatility, total returns, maximum drawdown, and ex-post Sharpe ratio for each sector from February 2, 2019 to March 3, 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 4a. Price performance over time by sectors that had positive returns between February 2, 2019 to March 3, 2019.

Figure 4b. Price performance over time by sectors that had negative returns between February 2, 2019 to March 3, 2019.

Figure 4 shows the correlation between the daily returns of each sector. Stablecoins had low to moderate positive correlation with other sectors. As shown in Figure 2, stablecoins continued to fulfill their intended purpose well by maintaining low volatility, mean daily returns of 0%, and a near zero total return of -0.14% over the observation period. The S&P 500 also had little correlation with any cryptocurrency sectors. As for the other sectors, they had high positive correlation with each other, ranging from 0.66 to 0.94, almost the same compared to 0.66 to 0.95 from two weeks ago. Digital content, the best performing sector, was the least correlated with the others.

Figure 4. Correlation between daily returns of each sector from February 2, 2019 to March 3, 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.

APPENDIX A: Methodology

The daily price data of cryptocurrencies in USD at 4:00 PM EST from February 2, 2019 to  March 3, 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 February 2, 2019, 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 February 2, 2019 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.

APPENDIX B: Terminology

  • 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.

Disclaimer

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.

📈 Cryptocurrency Triumphs & Troubles

By | News | No Comments

🔗 U.S. Authorities Charge Leaders of ‘OneCoin’

FRIDAY, MARCH 8, 2019

United States prosecutors announced criminal charges against leaders behind OneCoin, a multibillion-dollar cryptocurrency pyramid scheme. Konstantin Ignatov, Ruja Ignatova, and Mark Scott were charged by the Southern District of New York for wire fraud, securities fraud and money laundering. An estimated $1.2 billion of investor money was laundered to at least 21 countries

SOURCE: NASDAQ


⏸  Fidelity May Delay Support for Ethereum

FRIDAY, MARCH 8, 2019

Fidelity Digital Assets (FDAS) advises support for ethereum (ETH) may be delayed due to the latest hard fork upgrades. FDAS quietly launched this quarter and is a new company created by investing giant, Fidelity Investments. FDAS president, Tom Jessop, says they want ether and other cryptocurrencies to be available but the process it’s easy. Bitcoin (BTC) is currently the only digital asset supported on the platform.

SOURCE: COINDESK


🇰🇷 South Korea Establishes Task Force To Fight Crypto Fraud

FRIDAY, MARCH 8, 2019

South Korean’s Supreme Prosecutors’ Office(SPO) has created a new task force to protect consumers from fraud, crimes, money laundering, and other suspicious activities related to digital currencies. Cryptocurrency related crimes in the country have risen from 53 in 2016 to 4,500 in 2018. 

SOURCE: COINGEEK


⚙️ OKEx Lists Tron On C2C Market

THURSDAY, MARCH 7, 2019

Cryptocurrency exchange, OKEx, adds Tron (TRX) to its customer-to-customer (C2C) trading platform. The decentralized C2C platform allows users to trade assets directly with one another. In addition, users can place orders with self-selected exchange rates and pay using cryptocurrency or support fiat currencies.

SOURCE: COINGAPE


💸 eToro Launches Trading Platform & Wallet in the U.S.

THURSDAY, MARCH 7, 2019

eToro, the social investing and trading platform, officially announces the launch of  its fiat-to-crypto platform in the United States. The platform is already available in 140 countries worldwide and will now operate in 30 states and 2 territories in the US. Users will be able to use popular like CopyTrader to follow trading habits of individuals with a proven track record. eToro’s multi-signature wallet provide multi-coin support such as BTC, ETH, LTC, BCH, XRP and XLM

SOURCE: NEWSBTC


👍 SIX Teams Up With R3 Corda For New Digital Asset Exchange

THURSDAY, MARCH 7, 2019

The Swiss stock exchange, SIX, selects R3 Corda to provide its ucoming blockchain-based platform. It will use R3’s Corda Enterprise to power the Six Digital Exchange (SDX) platform to allow the issuing and trading digital assets, as well as tokenization of securities and non-bankable assets. 

SOURCE: FINEXTRA


🤐 Coinbase Clarifies It Never Shared “Personally Identifiable” Customer Data

WEDNESDAY, MARCH 6, 2019

Coinbase is still in the hot seat since its acquisition of blockchain analytics firm, Neutrino. Tensions raised last Friday when Christine Sandler stated that the exchange’s previous analytics provider was “selling client data to outside sources” in her interview with Cheddar. A spokesperson from Coinbase has now advised Sandler misspoke and clarified the exchange never shared “personally identifiable information with any third-party blockchain analysis vendors.”

SOURCE: COINDESK


🚀 Ripple Launches On Huobi’s OTC Platform

WEDNESDAY, MARCH 6, 2019

Cryptocurrency exchange, Huobi, now supports Ripple (XRP) on to its over-the-counter (OTC) platform which currently lists assets such as bitcoin, ethereum, tether, EOS, and Huobi Token. Huobi OTC aims to bridge the gap between fiat and digital assets, serving as an escrow for its users.

SOURCE: COINTELEGRAPH


📈 Swiss Stock Exchange Launches Ethereum ETP

WEDNESDAY, MARCH 6, 2019

Swiss’ SIX stock exchange launches its first ethereum-based exchange traded product (ETP) under the ticker AETH. Ethereum ETP, backed by startup Amun AG, is the second cryptocurrency-based ETP to be made available, with bitcoin ETP being the first. SIX plans to list a total of five crypto-based ETP’s which will also include ripple, bitcoin cash and litecoin. These collectively make up the Amun Crypto Basket Index  (HODL5).

SOURCES: BITCOIN.COM


🗳 MakerDAO Holds Vote on Fee Hike for DAI

UPDATE: FRIDAY, MARCH 8, 2019

Votes are in! Users and holders of DAI in favour of increasing the DAI stability fee from 1.5% and 3.5%.

SOURCE: CRYPTOGLOBE

TUESDAY, MARCH 5, 2019

MakerDAO is asking token holders of ethereum-backed stablecoin, DAI, to vote on whether to go forth with the proposed increase in stability fees from 1.5% to 3.5%. MakerDAO’s founder, Rune Christensen, states the rationale behind the fee hike is because DAI’s dollar-peg is “almost at a breaking point”. Token holders can cast their votes here.

SOURCE: COINDESK


⚖️ Quadriga Gets 45-Day Extension from Court

TUESDAY, MARCH 5, 2019

The Canadian court has granted troubled crypto exchange, QuadrigaCX, a 45-day extension to allow for the continued search of $140 million worth of missing cryptocurrency. In addition, the court has appointed Peter Wedlake, a retired partner and senior vice president of audit firm Grant Thorton, to be the chief restructuring officer (CRO). The court has also ordered Amazon Web Services to overturn any data on the Quadriga platform originally created by Gerald Cotten, the former CEO.

SOURCE: COINDESK


☑️ Tron (TRX) Partners With Tether (USDT)

MONDAY, MARCH 4, 2019

Tron Foundation officially announces their newest partnership with Tether. The partnership will bring Tether’s USDT coin onto the TRON network by the end of Q2 2019, and allow the issuance of a TRC20-based USDT. This marks the first major cryptocurrency crossover and will allow TRX and Tether users to transact on the TRON network with access to a price-stable asset.

SOURCE: ETHEREUMWORLDNEWS


🐋 Blockchain Watch: Hello Goodbye

FRIDAY, MARCH 8, 2019

Bitcoin whales moved a total of 9820 BTC, worth $38.4 million dollars.

THURSDAY, MARCH 7, 2019
WEDNESDAY, MARCH 6, 2019
TUESDAY, MARCH 5, 2019
MONDAY, MARCH 4, 2019

Bitcoin (BTC) and Stellar whales start off the week strong.

SUNDAY, MARCH 3, 2019

Ethereum whales are on the go, moving a total of 174, 450 ETH, worth $22.1 million dollars.

SOURCE: TWITTER


Images courtesy of Shutterstock

⚡️ Cryptocurrencies Go Live!

By | News | No Comments

🚦Bitcoin Finally in the Green After 6-Month Losses

FRIDAY, MARCH 1, 2019

Bitcoin (BTC), the world’s largest cryptocurrency by market cap, ends its 6-month losing streak; finally out of the red. It closed at $3,900 at the end of February. Even in this crypto winter, BTC’s bullish momentum show signs of recovery.

SOURCES: NEWSBTCCHEPICAP


🍴 Ethereum Hard Forks Now Activated

THURSDAY, FEBRUARY 28, 2019

Ethereum (ETH), the second largest cryptocurrency by market cap, successfully implements system upgrades Constantinople and St. Petersburg. Originally planned for January, the Constantinople fork was delayed due to concerns about potential security vulnerabilities. Both forks officially took place at block number 7,280,000. The upgrades are intended to increase the network’s efficiency and will reduce miner block rewards from 3 to 2 ETH.

SOURCE: ETHEREUM WORLD NEWS


📱Facebook & Telegram To Rollout Their Own Digital Currency

THURSDAY, FEBRUARY 28, 2019

Internet messaging giants like Facebook, Telegram and Signal, will be rolling out their own cryptocurrencies in next year. Their intent is to allow users to transfer money directly from their message platforms with the use of blockchain. The projects have been highly secretive and the question still remains whether the tech companies will fully control their cryptocurrency or if it there will be some form of decentralization.

SOURCE: NYTIMES


🏆 Kraken Offers $100K Reward For Info On Quadriga’s Missing Funds

THURSDAY, FEBRUARY 28, 2019

Cryptocurrency exchange, Kraken, announced they are offering a $100,000 reward to anyone who can provide the best lead on the discovery of missing coins from recently collapsed Canadian crypto exchange, Quadrigacx. It is estimated that a total of $190 million USD of Quadriga’s client funds remain inaccessible.  Kraken’s official blog highlights what is known to-date and any new tips can be submitted: here.

SOURCE: COINTELEGRAPH


🐋 Blockchain Watch: Ripple & Stellar On The Move

WEDNESDAY, FEBRUARY 27, 2019
  • Ripple: 50 separate transactions of 10M XRP each moved from Bittrex to Upbit. The total value of the transactions is equivalent to $159 million USD
  • Stellar22 separate transaction of  10M XLM each moved from Bittrex to an unknown wallet. The total value of the transactions is equivalent to $19 million USD. 

SOURCE: DAILYHODL


☑️ Ripple Now Listed on Coinbase Pro

TUESDAY, FEBRUARY 26, 2019

Users on crypto exchange, Coinbase Pro, can now buy and sell ripple (XRP) – the third largest cryptocurrency by market cap. Despite regulatory concerns, Coinbase stands its ground and makes XRP available to its users in the US (except New York), Canada, UK, supported EU nations, Singapore and Australia, with more jurisdictions to be added in the near future. Further developments can be found on Coinbase’s official blog post.

SOURCE: COINDESK


📈 Bitcoin & Ethereum Indices Now Live on Nasdaq

TUESDAY, FEBRUARY 26, 2019

Nasdaq’s integration of Brave New Coin‘s bitcoin liquid index (BLX) and ethereum liquid index (ELX) is now live. The real-time indices are available for clients using Nasdaq’s Global Index Data Service SM (GIDS). This move affirms Nasdaq’s optimism towards cryptocurrency with Adena Friedman, president and CEO, previously expressing it is a “tremendous demonstration of genius and creativity.”

SOURCE: COINTELEGRAPH


⚖️ US Government Retrieves & Returns Bitcoin to Bitfinex

MONDAY, FEBRUARY 25, 2019

The United States government has retrieved and returned 27.66270285 BTC (worth $104,000) to cryptocurrency exchange, Bitfinex. A total of 119,756 BTC were stolen during the hack of August 2016; the return represents only 0.023 % of this total.

SOURCE: COINDESK


👀 All Eyes on Crypto Past, Present & Future

By | News | No Comments

📱 Samsung Galaxy S10 Features Blockchain Wallet

FRIDAY, FEBRUARY 22, 2019

Samsung officially unveiled the latest specs of its new Galaxy S10 phone on Wednesday, subtly hinting that it features the ability to store cryptocurrency private keys. In-store previews now confirm the built-in cryptocurrency wallet through its “Blockchain Keystore” app.

SOURCES: COINDESK


⏱ Korea Waits For Bitcoin ETF Decision By SEC

FRIDAY, FEBRUARY 22, 2019

An anonymous official from Korean Exchange (KRX) is reportedly waiting on the United States SEC’s decision on bitcoin exchange-traded funds (ETFs). As South Korea’s blockchain industry continues to grow, the US’s decision will heavily influence decision to launch ETFs its own country.

SOURCES: COINTELEGRAPH


🔍 FBI Seeks BitConnect Victims For Its Investigation

THURSDAY, FEBRUARY 21, 2019

The FBI continues its investigation into the now obsolete crypto exchange, BitConnect (BCC) which collapsed January 2018. They released a quick questionnaire seeking help from potential victims of the Ponzi scheme from January 2018.

SOURCES: ETHNEWS


🐋 Blockchain Movements: 47,200,000 XRP Transferred & Multiple Large BTC Transactions Overnight

WEDNESDAY, FEBRUARY 20, 2019

47,200,000 ripple (XRP), worth $15.7M, were transferred from a known OTC distribution wallet to an unknown wallet. This is the largest XRP movement seen to-date.

Multiple significant bitcoin transactions were processed last night, with the below totalling over 18,000 BTC, worth $70M.

📈 Bitcoin Futures Reach Highest Volumes of the Year

WEDNESDAY, FEBRUARY 20, 2019

Bitcoin futures contracts see surge in trading volumes reaching its current high of the year. CBOE Bitcoin futures contract had its first day above $2,000 indicating new interest in the crypto market. Bitcoin continues to rally in this bear market, currently trading around $4,000 but has yet to break beyond this price.

SOURCE: CNBC


📈 Ethereum Mining Pool Freezes Unusual 2,100 Block Reward 

WEDNESDAY, FEBRUARY 20, 2019

On Tuesday, Sparkpool, an ethereum (ETH) mining pool, received a payout of 2,100 ETH (worth $300,000) for mining block number: 7238290. This is 600 times the standard block reward, normally around 3 ETH. Today, Sparkpool temporarily freezes the 2,100 ETH as they reach out to the sender to determine a solution.

SOURCES: CRYPTOGLOBEETHERSCAN


Accurate Crypto Market Data Ultimately Leads to Winning Model

By | Coinscious Lab | No Comments

The world’s most valuable resource is no longer oil but data. [1] This holds true even for the finance industry. The control that financial companies wield over their data gives them enormous power, and the abundance and quality of data they use changes the very nature of the competition. According to Bloomberg, the financial sector is adopting big data analytics to maintain a competitive advantage in the trading environment” [2]. Quantitative- and high-frequency trading are ubiquitous, indispensable tools in current times, and their full value in cryptocurrency trading are being realized. A key aspect that is still often overlooked in quantitative crypto-trading is the quality of the data being used to design sophisticated prediction models.

In this era of cryptocurrency trading, those with the most data of the highest quality will surely win. In algorithmic trading applications, accuracy is one of the best quality indicators of a data source. It determines the execution prices, the model’s behaviour, and the model’s ability to fit the market efficiently and effectively. In the extreme case, high frequency traders care about order-by-order data to simulate precise market-making algorithms. In order to accurately determine what and how much to trade at a low cost, traders desire the finest scales of accurate data with low latency.

Many algorithmic traders incorporate massive amounts of data into their algorithms to create better pricing models and leverage large volumes of historical data to backtest their trading algorithms. Particularly with recent advances in machine learning, the data-driven approach to modelling is being emphasized more than ever before. Market behaviours are learned from black box models that recognize patterns in big data. This means that the accuracy of the data affects what the model learns and predicts. Thus, the more accurate data you have, the better you can simulate execution quality in algorithms.

Available Sources of High Quality Crypto-Trading Data

There are several companies that provide cryptocurrency market data. Kaiko, CoinAPI, and Coinscious are three well-known crypto data vendors. Most of these companies offer live and historical trading, order books, and OHLCV1  (open, high, low, close, volume) cryptocurrencies. However, what remains unknown, until now, is the quality of data these companies claim to provide. Therefore, the key question is: which data vendor has the highest quality data for you to gain a competitive edge?

The Basics

A simple way to assess data quality is to compare the exchange’s OHLCV data with derived OHLCV data. In the analysis below, the hourly level OHLCV data is computed for December 2018 amongst different data vendors. The error rates were measured over eight well-known exchanges: Binance, Bittrex, Bitfinex, Bitstamp, Bitmex, Huobi Global, Okex, and Coinbase Pro.

Figure 1. OHLC error rates for Bitcoin (BTC), Ethereum (ETH), and Ripple (XRP)2. Given that our budget limits us to purchase just one dataset between Kaiko and CoinAPI, we chose the more expensive one: Kaiko’s data

Figure 2. OHLC error rates for OHLC error rates for four alternative coins (ADA, XLM, TRX, ZRX)

Coinscious data proves to be the most accurate among these data vendors for the top 3 coins (BTC, ETH, and XRP). In average, Coinscious data are 38% better than Kaiko’s data, where the relative errors on OHLC are 39%, 41%, 31%, and 37% respectively (see Figure 1). Similar results have also been shown using four alternative coins (ADA, XLM, TRX, ZRX). Surprisingly, even though Kaiko data is accurate for high and low prices, their open and close prices are quite divergent when compared to Coinscious and CoinAPI.

Error In Trading Volume

In Figure 3 and Figure 4, volume error rates over time reveal the dates when the higher error rates occur. The spike in volume error rates occurs in two scenarios; the first scenario occurs when the volume and volume error rates spikes simultaneously, whereas the second scenario occurs when the volume error rates spike, but volume does not. The former can be attributed to increased latency on exchanges as traffic increases, whereas the latter can be attributed to internal server issues.

Figure 3. Absolute error between exchange volumes versus data vendors’ volumes in December 2018 (the lower, the better). The errors were measured for BTC/USD, ETH/USD, and XRP/USD on the top 7 exchanges3.

Coinscious’ error rates remain relatively low compared to other vendors’ error rates. Overall, it is clear that Coinscious data has the lowest error rates with respect to volume data.

Figure 4. Absolute distance error between exchange volumes versus data vendors’ volumes in December 2018 (the lower, the better). The errors were measured for the following alternative coins: ADA/USD at Bittrex, XLM/USD, TRX/USD, and ZRX/USD at Bitfinex.

The volume quality for alternative coins (i.e., altcoins) was also considered. Eight altcoins were randomly selected from different exchanges, including NEO, TRON, XLM, EOS, LTC, ZRX, and ADA. From the figure above, CoinAPI does not perform well on volumes with respect to these altcoins.

Reason For Data Discrepancies Between Vendors

Now you must be wondering, if the exchange provides public API, why would you need to purchase data? Firstly, public APIs have limited histories of information they provide, and unless a trader has stored historical price data, they would need to gather it from a third-party source. Secondly, even though exchanges provide public APIs, aggregating and preprocessing all possible cryptocurrency pairs for different exchanges is cumbersome, and arguably the most tedious step in developing a trading system. This is especially the case as the data receiving intervals gets coarser as the number of requests for data grows. It is for these reasons that the aforementioned data vendors exist.

More importantly, why do discrepancies in the accuracies exist across different data vendors? There are several possible reasons. It could be due to downtimes of exchange APIs. Or, given the thousands of combinations of cryptocurrency exchanges and trade pairs, there exist API rate limits on all cryptocurrency exchanges, and therefore a large number of data collection clients and complicated infrastructure is required.

While many companies are collecting vast amounts of data across different exchanges and coins, the quality of the data may be hidden underneath the quantity of the data. Especially in this era of a data-driven finance world, success and risk can be heavily dependent on the data quality and the data operations environment. Obtaining the right trading tools and hiring talented traders can certainly help, but even then, tools and people cannot guarantee success if the data is flawed. The cryptocurrency finance market definitely could benefit from having more of data quality analysis in order to understand the granular level of datasets and where they can obtain them.

Footnotes

  1. Open, high, low, close, volume (OHLCV) prices.
  2. Given that our budget limits us to purchase just one dataset between Kaiko and CoinAPI, we chose the more expensive one: Kaiko’s data.
  3. Top 7 exchanges include: Binance, HuobiPro, Bitfinex, Bitmex, OKEx, Bitstamp, and Coinbase.

References

[1] “The world’s most valuable resource is no longer oil, but data”. The Economist, 6 May 2017, https://www.economist.com/leaders/2017/05/06/the-worlds-most-valuable-resource-is-no-longer-oil-but-data

[2] “3 ways big data is changing financial trading”. Bloomberg, 5 July 2017, https://www.bloomberg.com/professional/blog/3-ways-big-data-changing-financial-trading/

Litecoin & EOS Surge, With Bitcoin Trading Around $4,000

By | Coinscious Lab, Data Analytics | One Comment

Coinscious Market Report

by Coinscious Lab

February 19, 2019

Biggest
30d % Gain

 Pundi X (NPXS)
+47.06%

Largest 30d %
Gain (Sector)

Payments & Settlements
+6.76%

Biggest
30d % Loss

 NEM (XEM)
25.41%

Biggest 30d %
Loss (Sector)

Data & Information
6.70%

Overview

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 January 20, 2019 to February 18, 2019.

Our universe of analysis includes 50 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.

Sector
Constituent Coins/Tokens
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
Resources SC, GNT
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

Analysis

Over the past month, 25 out of the 50 major cryptocurrencies that we examined are up from their values 30 days ago. Bitcoin (BTC), the largest cryptocurrency by market cap, recently broke out of the narrow range from $3,600 and $3,800 that it was confined to. It is currently trading around $3,950 at the time of writing. As is often the case, Bitcoin’s move upwards coincided with good news from other cryptocurrencies as well, with 44 out of the 50 cryptocurrencies having positive returns on February 18th.

Outside of cryptocurrencies, the S&P 500 has been performing well, up 3.93% from 30 days ago and closing last Friday at $2,775.60. 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 January 20, 2019 to February 18, 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 Pundi X (NPXS), with a total return of 47.06%. The second and third best cryptocurrency was Litecoin (LTC) and EOS (EOS), with a total return of 42.79% and 23.01% respectively. Pundi X and Litecoin both performed relatively better than the similar cryptocurrencies that make up the rest of their sectors. Pundi X is a token used for payments and settlements, while Litecoin falls into the digital cash category.

NEM (XEM) was the worst performing cryptocurrency, with total losses of 25.41%. Stellar Lumens (XLM) was the second worst performing cryptocurrency, with total losses of 22.56%. 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. Total returns ranged from -6.70% (data and information) to 6.76% (payments and settlements). There was a dip in all sectors except for stablecoins around the end of January but all sectors have rebounded, making recoveries with varying degrees of success.

Figure 2. Mean daily returns, historical daily volatility, total returns, maximum drawdown, and ex-post Sharpe ratio for each sector from January 18, 2019 to February 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 January 20, 2019 to February 18, 2019.

Figure 3b. Price performance over time by sectors that had negative returns between January 20, 2019 to February 18, 2019.

Figure 4 shows the correlation between the daily returns of each sector. As shown in Figure 2, stablecoins continued to fulfill their intended purpose well by maintaining low volatility, mean daily returns near 0%, and a near zero total return of -0.20% over the observation period. Stablecoins had moderate negative correlation with other sectors except for digital content, with which it had near zero correlation. As for the other sectors, they were less positively correlated with each other compared to the numbers we reported two weeks ago. Correlation ranged from 0.54 to 0.92, slightly lower compared to 0.66 to 0.95 previously. The S&P 500 also had near zero correlation with all cryptocurrency sectors.

Figure 4. Correlation between daily returns of each sector from January 20, 2019 to February 18, 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.

APPENDIX A: Methodology

The daily price data of cryptocurrencies in USD at 4:00 PM EST from January 20, 2019 to February 18, 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 January 20, 2019, 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 January 20, 2019 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.

APPENDIX B: Terminology

  • 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.

Disclaimer

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.

New Beginnings for Cryptocurrency

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Countdown to Bitcoin ETF Approval Begins

FRIDAY, FEBRUARY 15, 2019

An SEC commissioner stated earlier this week that bitcoin ETF would be approved “eventually“. In the wake of this announcement, NYSE Arca and Bitwise Asset Management filed a bitcoin ETF rule change proposal for review. Today, the SEC has published the filing in the Federal Register and the countdown begins.

SOURCE: COINDESK


🍕 Ordering Delivery? Use Bitcoin

FRIDAY, FEBRUARY 15, 2019

Pizza: the great people equalizer. Domino’s US customers can now easily order pizza using the Lightning Network. This week, over 150 people have already placed orders through the web-based portal set up by cryptocurrency payment startup, Fold.

SOURCE: THE DAILY HODL


🛎 JP Morgan introduces “JPM Coin”: 1st US bank-backed cryptocurrency

THURSDAY, FEBRUARY 14, 2019

JP Morgan created big buzz in both the financial and crypto markets by announcing the “JPM Coin”. Despite CEO, Jamie Dimon’s past public criticisms towards bitcoin, JP Morgan will be launching the first major US bank-backed cryptocurrency to settle payments for its clients in the wholesale payments sector.

SOURCE: CNBC

📈 Nasdaq Adds Bitcoin & Ethereum to Indices

THURSDAY, FEBRUARY 14, 2019

NASDAQ announced it will be adding bitcoin (BTC) and ethereum (ETH) indices effective Monday, February 25, 2019: details here. BTC index will be calculated back to 2010 while ETH back to 2014.

SOURCE: NASDAQ


🇨🇦 Quadriga Loses Another 103 BTC, By Mistake

TUESDAY, FEBRUARY 12, 2019

Vancouver cryptocurrency exchange, Quadriga, inadvertently transferred 103 BTC, valued at $354,300 USD, to an inaccessible cold wallets. Ernst & Young, the appointed monitor, reported that this transfer took place February 6, 2019.

SOURCE: COINTELEGRAPH