Released bi-weekly, this market report by Coinscious 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 April 13, 2019 to May 12, 2019.
Our universe of analysis includes 50 of some of the most widely used and traded cryptocurrencies. Please see Appendix A for the complete list.
The performance of major cryptocurrencies over the past month was overall not very good, with only 18 out of the 50 cryptocurrencies that we examined up from their values 30 days ago. Bitcoin (BTC), the largest cryptocurrency by market capitalization, was the best performer over the past month and bitcoin price is $7600 at the time of writing.
Outside of cryptocurrencies, the S&P 500 is down 0.83% from 30 days ago and closed last Friday at $2881.40.
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 April 13, 2019 to May 12, 2019. Higher returns at a given level of risk, measured through historical daily volatility, indicates a better investment. Volatility, on the x-axis, is presented in log scale.
The best performer overall over the past month was Bitcoin (BTC), with a total return of 39.46%.
The second and third best performing cryptocurrencies were Bitcoin Gold (BTG) and Link (LINK), with total returns of 36.42% and 35.55% respectively.
Zilliqa (ZIL) was the worst performing cryptocurrency, with total losses of 18.01%. Zilliqa is a public blockchain platform designed to handle high transaction rates that scale linearly with network size.
The second and third worst performing cryptocurrencies were Siacoin (SC) and Aeternity (AE) with total losses of 17.26% and 14.29% respectively.
Figure 2a. Mean daily returns, historical daily volatility, total returns, and ex-post Sharpe ratio for each cryptocurrencies with the highest total returns from April 13, 2019 to May 12, 2019. 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 2b. Mean daily returns, historical daily volatility, total returns, and ex-post Sharpe ratio for cryptocurrencies with the lowest total returns from April 13, 2019 to May 12, 2019. 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 3 plots daily candlesticks of the Bitcoin price and Ether price, the two largest cryptocurrencies by market capitalization. In addition, the following commonly used technical analysis indicators are shown:
– Simple moving averages (SMA) with periods of 50, 100, and 200 days
– Relative strength index (RSI) with a period of 14 days
– Moving average convergence divergence (MACD) with a fast EMA period of 12 days, slow EMA period of 26 days, and a signal period of 9 days
The indicators for all three cryptocurrencies share many common features. First, the 50-day simple moving average continues to stay above the 100-day moving average, a continuation of a long-term bullish signal.
Furthermore, for all three cryptocurrencies, the MACD line has crossed below the MACD signal line approximately a week ago. This is known as a bullish crossover and could be interpreted as a bullish signal.
The RSI values of all Ether and XRP are neither oversold or overbought, although both are trending upward and the value for Ether is almost crossing the 70 overbought threshold. Bitcoin’s RSI value is above 70 and indicates that it is overbought. Prices are typically expected to dip after being overbought, but momentum oscillators can also become remain overbought before actually reaching a peak during a strong trend.
Figure 3a. Bitcoin price (BTC) in USD at Bitstamp from April 13, 2019 to May 12, 2019.
Figure 3b. Price of Ether (ETH) in USD at Bitstamp from April 13, 2019 to May 12, 2019.
Figure 3c. Price of XRP (XRP) in USD at Bitstamp from April 13, 2019 to May 12, 2019.
Appendix A: Cryptocurrencies
Below is a complete list of all cryptocurrencies examined in this market report. In addition, we present the mean daily returns, historical daily volatility, total returns, and ex-post Sharpe ratio for each cryptocurrency from April 13, 2019 to May 12, 2019. 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.
Appendix B: Methodology
The daily price data of cryptocurrencies in USD at 4:00 PM EST from April 13, 2019 to May 12, 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. The only exception is Siacoin (SC), where we used the Yahoo Finance price instead due to data quality issues at the time of writing.
Daily closing price data of the S&P 500 index was obtained from Yahoo Finance. 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 C: 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.
Coinscious Inc. builds artificial intelligence and data-driven insights for the cryptocurrency market. Coinscious delivers compelling, informative analytics to the cryptocurrency community and uncovers hidden insights and patterns from the data behind the scenes. Coinscious is focused on helping the cryptocurrency community make informed judgements through its services.
Coinscious was established in 2018 and in Canada, Europe and China. Coinscious uses sophisticated financial engineering and quantitative technologies, such as statistical modeling, machine learning, market structure, and risk management techniques, in order to facilitate the maturation of the cryptocurrency market through various tools and tools.