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Crypto Market Report: Crypto Markets Rally for the Past Two Weeks

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Coinscious Market Report

by Coinscious Lab

January 7, 2019

Biggest
30d % Gain

  Waves (WAVES)
+99.69%

Biggest 30d %
Gain (Sector)

Data & Information
+51.21%

Biggest
30d % Loss

 Pundi X (NPXS)
-13.07%

Smallest 30d %
Gain (Sector)

Privacycoins
+0.34%

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 December 8, 2018 to January 6, 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.

Sector
Constituent Coins/Tokens
Digital Cash BTC, BCH, BSV, LTC, BTG, DOGE, DCR, BCD, DGB
Privacycoins XMR, DASH, ZEC, BCH, 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

Cryptocurrencies are holding on to their recovery, with bitcoin (BTC) off the lows and currently trading around $4,100, maintaining approximately the same level for the past two weeks. Other major cryptocurrencies have been performing well, with 45 out of the 51 cryptocurrencies that we examined up from their values 30 days ago. Outside of cryptocurrencies, the S&P 500 continued sliding downwards, down 3.84% from 30 days ago and closing last Friday at $2531.94.

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 8, 2018 to January 6, 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 waves (WAVES), with a total return of 99.69%. Waves was also the best performer in our report two weeks ago.

Also worth mentioning is Ethereum (ETH) the second largest currency by market cap at the moment, with total returns of 82.21%. This may be a result of the upcoming Constantinople hard fork, which will happen on block 7080000, around January 16, 2019. Constantinople is a non-contentious fork, meaning that the vast majority of the Ethereum community will be accepting the changes. The five Ethereum Improvement Proposals to be addressed are EIP 1234, EIP 145, EIP 1014, EIP 1052, and EIP 1283. Most notably, EIP 1234 will drop mining rewards per discovered block from three to two ETH, thus decreasing the supply of new ETH.

Pundi X (NPXS) was the weakest performing cryptocurrency, with total losses of 13.07%. Pundi X is a decentralized payment ecosystem that uses NPXS tokens on proprietary physical point-of-sale devices.

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. All sectors had positive total returns, with gains ranging from 8% to a little over 51% (excluding stablecoins). Out of all the sectors, data and information performed the best, with a total return of 51.21%. The data and information sector is composed of IOTA (IOTA), VeChain (VET), chainlink (LINK), and augur (REP).

Figure 2. Mean daily returns, historical daily volatility, total returns, maximum drawdown, and ex-post Sharpe ratio for each sector from December 8, 2018 to January 6, 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 8, 2018 to January 6, 2019.

Figure 3b. Price performance over time by sectors that had negative returns between December 8, 2018 to January 6, 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 0.34% over the observation period. As for the other sectors, they had high positive correlation with each other, ranging from 0.67 to 0.97. The S&P 500 had little correlation with any cryptocurrency sectors.

Figure 4. Correlation between daily returns of each sector from December 8, 2018 to January 6, 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 December 8, 2018 to January 6, 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 8, 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 8, 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.

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.

Coinscious Market Report: December 21, 2018

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Coinscious Market Report – December 21, 2018


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 are planned to focus on metrics derived from a 30-day rolling window of data, this time from November 20, 2018 to December 20, 2018. In this report, we also provide analysis on bitcoin price movements from a technical perspective to see where the market as a whole may be headed in the near future.

Coinscious Market Report: December 10, 2018

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Coinscious Market Report – December 10, 2018


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 are planned to focus on metrics derived from a 30-day rolling window of data, this time from November 7, 2018 to December 7, 2018. In this report, we also provide analysis on bitcoin price movements from a technical perspective to see where the market as a whole may be headed in the near future

Coinscious Market Report: November 23, 2018

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We’re excited to share our first Coinscious Market Report by Coinscious Lab. 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 are planned to focus on metrics derived from a 30-day rolling window of data, this time from October 23, 2018 to November 22, 2018.

Read more: Coinscious Market Report: November 23, 2018

The Coinscious Global Tour Comes to a Close

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The Coinscious team landed in Hangzhou where we made an appearance and spoke at the Consensus Ark symposium. This event was attended by Janson Jiang, our Co-Founder and CSO; David Buell, our Director of Marketing; along with members of our Shanghai team. This significant event was sponsored by CA Consensus College, One TV, and BC Incubation Commune.

Janson took to the stage and described the three core technologies of the Coinscious Collective™ platform: Big Data, Artificial Intelligence and Blockchain. He emphasized how the Coinscious Collective™ platform is designed for both professional traders, as well as your non-technical average joes. Janson stressed the importance of having good insights in order to successfully trade in the coin market, but noted that there is currently a lack of good data providers. He advised that in order to address this concern, Coinscious has deployed hundreds of global servers to collect data from major exchanges and blockchains. He also announced that Coinscious has set up a laboratory with a team of top AI experts to analyze the rules of cryptocurrency. In a couple months, this data will be available to our institutional users.

In his presentation, David discussed the current status of the coin market. He explained how the bearish coin market is just a part of the volatility of an immature market. Even so, there is a lot of optimism for the coin market. Even with lower coin prices, more funds continue to move into the space and we also see that user adoption is growing year-after-year. Globally, the coin market is still in its infancy and its continued adoption by the general public will help allow it to further mature.  

On to Wenzhou

The last and final destination on our Coinscious global tour was Wenzhou! We had the great opportunity of attending an intimate and private event with 30 distinguished guests. During this event, our team introduced our Coinscious Collective™ platform and shared insights into cryptocurrency investment trends, tools, and strategies.

Janson had the honour of being a keynote speaker here, as well. During his speech, he shared his views on the current global coin market and the pain points it is experiencing. He noted that the coin market is currently in a rapid-growth stage. Inevitably, risk comes with opportunity. The main challenges for the coin market include: unpredictability of news reports, lack of useful information, security issues, multiple exchange accounts, and multi-wallet management difficulties. Janson explained that ultimately, there is a lack of big data and analysis tools that can deliver professional quantitative analysis. Together, all of these challenges erect barriers that prevent potential investors from entering the market.

Furthermore, Janson described how AI-driven insights can make up for these shortcomings. He carefully illustrated how an automatic arbitrage trading scenario was able to take advantage of the value found within the Coinscious Collective™ platform. He shared the platform’s 24/7 event monitoring capability, pattern recognition and event analysis features, as well as ratings based on user risk preferences and ROI expectations.

Just as in Hangzhou, the responses we received were overwhelming and humbling. Both individual and institutional investors showed great interest in Coinscious and its data services. Many expressed their eagerness for our platform to launch so that they can start accessing investment tools that will provide helpful market forecast and trading strategies.

At this event, Janson and Tom participated in a Q&A session. Below are some highlights from that interview.

Q1: How can Coinscious beat competition that offers similar tools and services?

A1: There are very few, and in fact no major players, offering data services in the cryptocurrency market. If you take the stock market as a benchmark, many companies provide data services in every country’s market. In terms of numbers, there is nothing comparable in the cryptocurrency market. In addition, our AI-driven analysis methods differ greatly from the traditional algorithm and speed driven financial markets, like the stock and foreign exchange markets. Given the unique traits of the cryptocurrency market, we believe that the Coinscious platform could help quantitative trading investors perform better.

Q2: In the traditional markets, the quantitative operation needs to be back tested, using data from five or even ten years ago. A data set that large is not available in the cryptocurrency market. Given the lack of data, how can Coinscious overcome the difficulties of quantitative trading?

A2: This is exactly the type of challenge that Coinscious was created to address. Coinscious extracts available data from reliable sources, providing users with the opportunity to create better investment strategies. Through our own unique data analysis, we provide more information to help investors find more opportunities and build quantitative strategies that can adapt to the cryptocurrency market.

We also recognize that the cryptocurrency market requires a different strategy. The market changes rapidly, making historical data less useful compared to traditional markets. A strategy that worked in 2016 is less likely to work in 2018.

Further, Coinscious helps investors in the traditional market understand and adapt to the crypto market using AI-driven data analysis. Finding useful data is crucial to this market. Quantitative traders have to create strategies based on the data they can access. In this market, patterns and insights change all the time. It’s hard to accumulate historical data, since many cryptocurrencies have only short histories. This demands a quantitative trading strategy that differs significantly from strategies used in traditional financial markets.

 

Coinscious in Beijing

How To Stay Ahead In A Bearish Coin Market

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As the once-hot cryptocurrency market has cooled, investment has cooled, as well. As the downward market trend continues, investors face a bear market, wondering what their next moves should be. Some investors hope cryptocurrency tycoons will raise prices and help them out. Yet the pioneers in this market, who have access to the world’s leading investment advisory tools, don’t feel the burden of the bear market. When the market is bad, they don’t lose much. When the market is strong, they win more than average. As a blockchain and AI-driven tool designed for the cryptocurrency market, Coinscious filters complicated market information, draws effective conclusions from it, and recommends strategies to users. With this information at hand, users can not only protect their capital but also profit during a down market.

One motivating factor behind our global tour has been to let more investors know that the current situation is solvable. The goal has been to let more investors experience the advantages that Coinscious offers.

On August 17, 2018, a closed-door investment meeting of quality blockchain projects was held in Beijing Haidian Quanpin Mansion. As a leading international AI and blockchain intelligent investment advisory project, Coinscious was invited to attend and received interest and accolades from experienced Chinese investors gathered there.

Our CSO, Janson, spoke at the event, giving an example of what we call the “Coinscious Lab”, where we conduct experiments, analyze them, and share the results with the public. Janson shared our latest Coinscious Lab experiments including arbitrage, short term price prediction, correlation between social sentiment and price change, token correlation analysis and orderbook analysis. The attendees really enjoyed seeing the successful results.

After learning more about how the Coinscious platform worked, investors showed high interest in our business model. They also expressed their willingness to try our service after launch. Many investors expressed their hope of being able to upgrade their trading experience and results using our tool.

Several investors and participants in the blockchain community were in attendance, including OK Capital, AKHacks, Tfund, ValueNet Capital, FBG Capital, WBO, GVC, BQEX, BlockOrigin Capital, ValueNet Capital, MPT, AFund, OnFund and many others. As has been true at every stop of our global tour, the Coinscious team has been inspired and motivated by the enthusiasm that always greets our presentations. Excitement is being generated around our platform everywhere we go. That fervor has sparked our team’s passion for what we do making us more focused than ever on continuing to create a platform that helps resolve some of the biggest issues investors face in the cryptocurrency trading market.

At this event, Janson participated in a Q&A session. Below are a couple of highlights from that interview.

Q1: From what I understand about Coinscious, it seems your business does not rely much on blockchain technology itself. Yet there are many existing companies that offer data service to exchanges, funds, or cryptocurrency investors. What makes Coinscious different?

A1: Currently, we run more like a centralized project. However, we hope to have decentralized data sharing that networks with the whole community in the future. The data itself requires a large amount of storage so it is not practical to centralize that storage. Regarding offline data analysis such as simulations, it does not require fast data retrieval. This means that there are many data storage approaches that can work in this case. In order to reduce the pressure from a high demand for large data storage and AI computation resources, we would like to leverage the capacity of the community as a resource. IPFS protocol and computation nodes will be introduced so that community members can contribute storage and processing power respectively, and get rewards in return.

Q2: Who is your major target market—individuals or institutions? Do you already have a user base?

A2: At this stage, our biggest clients are institution funds and quantitative teams that buy our data. Just as people asked during our tour of the United States as well as in Shanghai, how do you sell the data? What data do you have? They would like to use this data immediately, including the currencies and exchanges that we have access to. With this high demand, our data service will be launched in two months, and sales should be easy to achieve.

On the other hand, we will also offer a tool for general users to track and manage their assets. It will be a free tool to help get more people interested and using cryptocurrencies, while also educating them. This is an important step in helping the market stabilize and mature.

 

Coinscious Labs Arbitrage

Coinscious Lab: Arbitrage

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The Challenge of Arbitrage in Crypto Markets

People get excited when they hear about arbitrage opportunities in the crypto market. That excitement is driven by frequently seeing big price differences between exchanges. If you have coding skills, you might think taking advantage of those price differences using arbitrage will be a piece of cake.

The real challenges come as you write, test, and run your code against exchange accounts. Here are just a few of the challenges that come from trying to execute an arbitrage strategy in the crypto market.

Simulation Accuracy

Most developers use simulations to verify their ideas and coding. However, depending on how you execute your simulation, your simulation results might be quite different from your real-world  results. For example, if your simulation is based on the order book (open buy and sell orders), your simulation result might be totally misleading.

Placing Orders

When you see price differences between exchanges, do you check price differences in the order book as well? Do you know if your orders will actually be fulfilled or the timing of those orders?

Capturing Future Opportunities

After you make some arbitrage transactions, you might find one exchange price is always higher than another. Opportunities to take advantage of arbitrage may decrease. How will you continue to profit with limited funds and fewer opportunities?

Technical Challenges

The crypto exchange is not like the stock exchange. Most crypto exchange APIs are not designed for high-frequency trading. Some APIs are poorly designed and unstable. The exchange may go down. The API server could stop responding. Perhaps internal logic or a limit is changed on the exchange side. There are many scenarios where API calls fail. It might be harder than you think to execute a robust arbitrage program without human interaction.

Weighing the Risks

Transaction fees are not cheap in crypto exchanges. If you have transaction success in one exchange, but failed transactions in another, you could lose money very quickly.

Profit Expectations

Of course, everyone would like to know if profit expectations through arbitrage are real and reliable. Many variables come into play when answering this question.

Choosing an Arbitrage Coding Strategy

In addition to two-point arbitrage, you also might hear about triangle or multiple-point arbitrage. Do you understand which strategy is best for you? Does fund size affect your arbitrage strategy? What is the proper fund size you should try? Answering these questions might be harder than you thought.

Bot Parameters

The parameters used by trading bots are also important. There is no “one size fits all” bot that can simply run for you all day every day. Bot parameters have to be set, tested, optimized, and then put into practice in the real world.

Experiment Goal

In this lab experiment, we conducted an arbitrage experiment to determine how to overcome the challenges mentioned above. This lab experiment will also verify what kind of data support is needed to maximize profit and minimize risk.

Profit Snapshots 

Coinscious Labs Arbitrage

This image shows the total amount of transactions completed per day.

 

Coinscious Labs Arbitrage

This image shows a breakdown of all 36 transactions from January 14. The highlighted price in the top right of the image shows that we bought 13.46 LSK at a price of 0.00194800 BTC, on Binance. Correspondingly, this transaction is shown in the Binance transaction history in the snapshot below.

 

Our results in the Binance transaction history

 

Experiment Results

We ended the month with a profit of +0.81616874 BTC (+55.34%), and +80.02477571 LSK (+8.07%).

We see our transactions in the real world, fully automated, with a dynamic configuration of different variables and parameters.

This lab experiment was conducted on several combinations of currencies (such as: BTC/LSK, BTC/USD, BTC/IOTA, BTC/ETH) and on different exchanges.

All experiments were successful. In this Coinscious Lab experiment, we looked at the results of our BTC/LSK arbitrage. For data and information on other experiments, please contact us.

Coinscious Labs Arbitrage Results

Here we see the accumulative results of arbitrage for each day during the month of January.

 

Future Development

Based on different experiments completed by Coinscious Lab, the Coinscious product team will create new product designs that cover the various needs in crypto arbitrage. These designs will not only help traders capture more opportunities, but also will optimize the process through simulation, AI optimization, profit estimation, and so on.

 

The Coinscious Summer Tour  – July

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For us here at Coinscious, this has been the summer of conferences and expos. We’ve been on an international tour  —  Amsterdam, Atlantic City, Montreal, San Francisco, DC, and Krakow. Our goal: to show businesses the new Coinscious Collective™ platform and services, and to connect with thought leaders doing groundbreaking work with blockchain and cryptocurrency.

First up was the Blockchain Expo in Amsterdam, packed with 8,000 attendees. Day one focused on ICOs and cryptofinance, while day two focused on the effect of blockchain on insurance, banking, and payment options. Both days delivered insight on how blockchain tech is transforming existing business models. There was also significant focus on challenges developers face as they try to build blockchain apps.

David Buell and Binh Ho

David Buell (Coinscious Marketing Director) and Binh Ho (Coinscious COO) at the Blockchain Expo in Amsterdam, Netherlands

Between conferences, our CTO, Daniel Im, made his way to Atlantic City for the Blockchain World Conference. There he listened to leaders weigh in on potential US blockchain regulations. He also offered his congratulations to Amir Dossal for winning the Blockchain Humanitarian award, an aware created to  honor leaders who are using blockchain technology to solve real-world challenges.

Allison Shealy (Attorney at Shulman Rogers), Daniel Im (Coinscious CTO), and Amir Dossal (‘Blockchain Humanitarian’ Award Winner)

From there, we attended Startupfest in Montreal. This has been called “a music festival for startups” by Reddit Founder Alexis Ohanian. The event takes pride in rethinking how conferences should be done. It’s a place where startups can shine, make connections, meet interested investors, and learn from others who have successfully navigated their own startup journey. While there, our CTO, Daniel Im, discussed how to bridge the gap between AI research and the AI industry.

Daniel Im (Coinscious CTO) at Startupfest Montreal

Next, it was on to San Francisco for Distributed 2018, where we were a sponsor. Distributed focuses on the power of the decentralized business and aims to bridge the gap between Eastern and Western blockchain initiatives. At one panel, leading cryptocurrency exchange leaders discussed the quickly changing landscape surrounding the coin market, its infrastructure, regulations, and oversight.

Coinscious was a sponsor at Distributed 2018 in San Francisco. Shown here are Binh Ho (COO), Agnieszka Osuch (Communications Manager), Daniel Im (CTO), and Ena Vu (Project Manager).

Cointime interviewed Coinscious at Distributed 2018. With Ethan Skowronski-Lutz, David Buell (Coinscious Marketing Director), Binh Ho (Coinscious COO), and John Gidding.

Also at Distributed, Daniel connected with Bianca Chen, who is currently executive producing the docuseries “Next: Blockchain.”

Bianca Chen (“Next: Blockchain” Executive Producer  — middle left), Daniel Im (Coinscious CTO — middle right)

In Krakow, Poland, our team hosted an event for local blockchain and cryptocurrency enthusiasts. Our COO, Binh Ho, spoke to attendees about AI and data-driven insights for the coin market.

Binh Ho (COO) hosting a blockchain event in Europe

On this tour, we met a lot of amazing people and companies. These interactions showed them that, now more than ever, there’s a need for our platform. The blockchain industry is really starting to develop. Thought leaders and professional and amateur investors are looking for a platform like the Coinscious Collective™ that can help them navigate and respond to the nuances, complexity, and volatility of the coin market.

Our whirlwind summer tour isn’t over yet. During August, the team will be in Asia, connecting with people passionate about blockchain and cryptocurrency. We’ll also be in Las Vegas at BlockShow. Be sure to follow our journey on social media!

Cryptocurrency Arbitrage

What is Arbitrage?

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What Is Arbitrage and How Is It Used in the Coin Market?

The Merriam-Webster dictionary defines arbitrage this way:

The near simultaneous purchase and sale of securities or foreign exchange in different markets in order to profit from price discrepancies.

Let’s break that down further and also understand how arbitrage strategies are used in the cryptocurrency market.

A Simplified Explanation of Arbitrage

Arbitrage is considered a no-risk profit strategy when executed against traditional financial instruments. Why? Because you are buying an asset and selling it simultaneously for a higher price at a profit. It’s considered no risk because there is no hold time or delay between the transactions and the profit is guaranteed.

This type of transaction can be completed with any asset type, but typically the assets are bonds, stocks, currency or other financial instruments.

Here’s a simplified example. A stock is trading for $10 in the New York Stock Exchange (NYSE), but is trading on the Tokyo Stock Exchange (TYO) for $11. You would buy the NYSE stock at the lower price and simultaneously sell the stock in the TYO, making a $1 profit per share.

Because of automated trading systems and high-frequency trades it’s rare for this sort of price discrepancy to occur, making it rare for arbitrage trades like this to happen. Today, when these discrepancies are noticed, they usually only last for a short window of time, measured in seconds or even microseconds. High interest in the “cheap” stock raises its price and subsequently drives down the price of the “expensive” stock. Even before automated trades, arbitrage was viewed as a mechanism for maintaining equilibrium across markets.

What Does Arbitrage Have to Do with Cryptocurrency?

Unlike the stock market, the coin market is ripe for arbitrage. Cryptocurrency don’t support high-frequency trading, which means there are fewer automated trading robots controlling or responding to price fluctuation. There are fewer pressures or controls to ensure pricing equilibrium across exchanges. Also, when new exchanges open, they offer an opportunity to buy in a more established exchange to sell at a profit in the new exchange.

If you plan to pursue arbitrage as a trading strategy, there are three things you must consider:

  • Fees. This can include trading fees, withdrawal or deposit fees, and blockchain fees. You have to calculate if the fees you incur will eat the profit that you anticipate making.
  • Time. Rarely do trades happen simultaneously in the coin market as they can in the automated stock exchanges. You have to weigh the risk that you’ll miss the pricing window if a trade is slowed down for some reason.
  • Risk. Arbitrage in the stock market is considered no risk. Because of the time and fee considerations mentioned above, arbitrage in the coin market is hardly a no-risk venture.

What Do You Need to Profit from Coin Arbitrage?

Reliable information about cryptocurrency is one of the most valuable assets you can possess. In this relatively new market, it’s also one of the hardest assets to find.

If you plan to use arbitrage in the coin market, what information and tools should you look for?

  • Rates: To benefit from arbitrage, you’ll need to know current rates of exchange. Seek out information sites that provide up-to-date coin prices.
  • Opportunities: Try to access a service that can send alerts about potential opportunities. Alerts can help you act on opportunities before other traders do.
  • Simulations: Success in the coin market relies on creating and executing smart trade strategies. Simulation tools can help you validate and improve your trade strategies.
  • Bots: Automation helps traders stay on top of market changes. You can use bots set up to take specific actions based on limits that you set.

You may need nerves of steel to execute coin arbitrage, but having reliable, credible information should remove at least some of the guesswork.

Actionable Intelligence: What’s Missing from the Cryptocurrency Trading Market

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Actionable intelligence: Relevant information needed to make a decision or take an action, usually quickly.

You’ve probably heard the phrase actionable intelligence before. Sometimes it’s used in law enforcement. When an informant or a witness tells a law officer about a crime they’ve observed or about plans to commit a crime, that’s actionable intelligence. It gives law enforcement reasonable cause to take an action of some kind.

The phrase also applies to business and refers to any information that gives a business a competitive edge or improves its performance. For example, a business hears that a competitor plans a sale of a product tied to a holiday. The business may then match that sale and perhaps start it earlier to get a jump on their competition.

Market Immaturity Distorts Intelligence

Actionable intelligence is news you can use. Right now, reliable information that can be acted on is missing from the cryptocurrency trading market. Traders have access to some information, but its accuracy may be in doubt. Traders rarely have access to key information they can use to inform their market moves.

Cryptocurrency trading faces the same pressures that other new markets have faced. There is little infrastructure to support this market. Some coin exchanges must suspend account creation due to high demand and load. Traders worry about security issues, delayed transactions, price manipulation, and robot use by other traders. Risk, uncertainty, and security concerns loom large over coin trades. There’s also little if any regulation of these markets, causing some traders to lose faith in the exchanges. Price manipulation and hacking incidents erode investor trust. Every country is coming to terms with the arrival of cryptocurrency. Some are embracing the market as a sign of things to come. Others are fiercely opposing the markets, believing cryptocurrency to be a nuisance that will eventually disappear.

The volatility and unregulated nature of these markets means investors must stay aware of security issues. Hyperbolic ads, planted news reports, and social media hysteria create a “gold rush” mentality convincing people to sink their money into questionable coin offerings. For the serious investor, the challenge comes in separating reliable data from noise.

For all these reasons, Coinscious is determined to deliver actionable intelligence in their platform. While other sites and apps simply provide information, Coinscious actively uncovers patterns in the information. With these AI-generated and data-driven insights, traders are better equipped to build portfolios and create, execute, and refine their trade strategies.

Defining Actionable Intelligence

Despite continued signs of volatility, the cryptocurrency market is actually maturing. Governments and regulatory bodies are paying close attention because of the value flowing through the market. Investors are looking for dependable intelligence that they can use to create smart trading strategies. Traders are clamoring for tools like those used by stock market investors, which can regulate their trades and follow buy/sell rules. These are all signs that sanity is gaining ground in this emerging field.

As this market continues to mature, what attributes should traders want in the information they use to inform their decisions?

  • Reliable: Find sources that offer intelligence regularly and that have proven to be dependable.
  • Credible: Credible sources offer reasonable grounds for being believed. These sources are backed by primary data that can be checked against.
  • Hype-free: Much of the publicity surrounding the coin market is filled with hype and traders may allow emotion to drive trades. It’s important to track sentiment, but that measure needs to be correlated to price data.
  • Timely: Intelligence only matters if it comes early enough to be acted on. Serious traders need a consistent flow of information that comes on time every time.
  • Accurate: Information does no good if it’s riddled with errors. You need exacting, error-free data as you maneuver through the coin market.

Using the Power of AI and Deep Learning to Deliver Actionable Intelligence

The Coinscious Collective™ platform tracks price, trade, and social media data, using AI to separate data from hype. The goal is to deliver actionable intelligence that investors can use to evaluate market performance and create smarter strategies. The platform uses deep learning to reveal hidden patterns. Our models generalize future trends while also factoring in uncertainty. In this way, the Coinscious Collective™ platform limits non-essential data and delivers statistically credible information that both amateur and professional investors can rely on.

Want to understand how the Coinscious Collective™ platform delivers actionable intelligence? Visit Coinscious.io to learn how Coinscious works.