Offtopic: Quantitative Analysis of Altcoins, part II

On December 5, 2017 By CryptoAdvisorIn Other4 Comments

In part I, I did a quick analysis of altcoins compared to XBT, this time i’m going to check their performance using all available data of each altcoin since inception date using daily data instead of weekly to improve the granularity of the analysis because, the finer the granularity of the analysis, the better the insights for understanding the characteristic of the asset.

ALTCOIN	Gain (G)	Volatility (RMS)

Ethereum	0.998	0.072
Monero	0.996	0.073
Next	0.995	0.074
Dash	0.993	0.111
Litecoin	0.991	0.115
Ethereum Classic	0.990	0.084
Stellar Lumens	0.987	0.135
Eos	0.981	0.126
Iota	0.979	0.117
Bitcoin Cash	0.977	0.161
Ripple	0.975	0.187
Zetacash	0.947	0.201
Qtum	0.912	0.265
Bitcoin Gold	0.740*	0.570*

*Note that because of the very short size of the Bitcoin Gold dataset, its Gain (G) and volatility might change a lot in the long run.

If I were forced to assemble a portfolio of altcoins, i’ll probably opt for low volatility alts, like Ethereum, Monero, Next and Ethereum Classic. Eventually I would add Dash and Litecoin because by increasing the number of assets as a result I will reduce the final volatility of the portfolio.
At the end of this post you will find what i’d actually do if asked to diversify an initial capital of bitcoins.

To give you an idea of the Gain (G), you have to power this number to the number of days interested, for example (G)^365 will give you the average value of your asset in 1 calendar year.

For Ethereum is:

0.998^365 = 0.4815

or a 52% expected decrease in value towards XBT in 365 days.

How Much to allocate individually on each altcoin?

This is a simple question with a simple answer, the formula to obtain the fraction of your capital to wage on a particular asset is:

F = 2P - 1

Where P is the Shannon Probability and F the optimal fraction of your capital to wage. The Shannon probability of a time series is the likelihood that the value of the time series will increase in the next time interval. The Shannon probability is measured using the average, avg, and root mean square (volatility), rms, of the normalized increments of the time series as i explained in previous udpates.

For Monero is:

F = 2 * 0.4953 - 1 = -0.0096 or ~1% as an optimal fraction to wage

For Ethereum is:

F = 2 * 0.5079 – 1 = 0.0158 or 1.6% as an optimal fraction of your capital

Monero has both the Persistence and Gain negative but what about Ethereum? How is it possible to have a positive persistence and negative Gain (G = 0.998)?

Well the point is that an asset’s gain in value can be negative, even though the likelihood of an up movement is greater than 50% or 0.50 (in this case 0.5079). How can the time average of something be positive, and result in negative values?

It may seem counter intuitive, but just because the average daily gain in value of an asset is positive, is not sufficient evidence that the asset’s value will increase or be a decent investment.

Do we really see asset class with these kinds of price characteristics?

The answer is that we do. During the dotcom equities bubble of the 2000, about half of the equities had these characteristics; many were to fall the hardest, too. I think the same about many altcoins/ICO, they will end badly in comparison to Bitcoin.

This is why a possible asset allocation might be to go short against Altcoins with a fraction of your Bitcoins (says 10% shorting 5 crypto); it is a strategy that might suffer some losses in the short term if you are unlucky with volatility going against you, but it will surely win in the long run.

In the upcoming PART III – We will better understand how to assemble a portfolio of cryptocurrencies starting with EURO or USD instead of Bitcoin and it’s intended for who hasn’t yet invested in any Crypto.

Weekly Range Update: BCC? We don’t care.

On July 31, 2017July 31, 2017 By CryptoAdvisorIn Short Term Trading2 Comments

XBT / USD weekly price range at 2200$-3140$ | For this week the range is similar to the previous one because the 2 months VWAP average is basically flat. Last week I was expecting a breakout outside the congestion range with a new maximum or a test down to the VWAP at 2440$, this latter possibility occurred.
As long as the price continues to remain above the VWAP at 2440$, the situation remains positive.

As for the other indicators I use in this template, you can see that the ALMA mov.average is still up and the RSI has almost tested the overbought zone at 70.

As for the tomorrow’s event I see it as the mere birth of a new altcoin, I do not expect a big impact on the XBTUSD cross price as it is not an unexpected news and has already been discounted by the market , it might have the effect to increase volatility but I don’t think that tomorrow will begin a bearish move due to this event.

In case of extreme fall, the support area is 1300$-1650$.

Follow me also on Twitter where I started to publish charts on both bitcoin and some of the most important altcoins using the TradingView.com platform
ITA version here

Weekly Range Update

On July 3, 2017July 3, 2017 By CryptoAdvisorIn Short Term Trading, weekly range update

XBT / USD weekly price range is 2400$-2880$ | The XBTUSD cross resists over 2400$ support but as I said last week there is always a risk that it breaks down towards the 2 months VWAP roughly at $1950.

With the ALMA daily moving average pushing bitcoin down and its effort to stay above 2400$ there is some sort of compression also visible in the chart as a symmetric triangle (descending tops and ascending bottoms), as I have said several times in the past this pattern usually forms during a trend as a continuation pattern thus it should end with an upside breakout.

To conclude, the average RSI oscillator is in neutral zone near 50 and the RSI itself has stopped falling without ever entering the oversold area below 30.

In case of a catastrophic event the support area is 1150$-1450$.

Follow me also on Twitter where I started tweeting charts about bitcoin and some altcoins too using the TradingView.com platform
ITA Version Here

OFFTOPIC: a quick view of an altcoin

On May 17, 2016May 17, 2016 By CryptoAdvisorIn Other3 Comments

This is an attempt to forecast where the next big movement will end of this altcoin, an altcoin that recently is getting lot of unjustified attention from the bitcoin community. I don’t know if people is bored of bitcoin and is trying to pursuit a “get rich quick scheme” pumping their bitcoins in this altcoin, aniway it is not the purpose of this article to prove it or not.

Here there is the weekly chart with logscale for the price axis.I highlighted the first big up movement and the subsequent price drop, a perfect 62% fibonacci retracement down from the top to 0.015 btc/unit. Assuming that the current bullish movement will be of the same size of the previous one using a logarithmic scale the target should be at 0.135 Btc/Unit. There would be price retracements for sure before reaching such an optimistic target therefore a more likely long term top could be the point half way between our initial target and the bottom used as a starting point for our forecast. As indicated in the chart this potential resistance level is around 0.047 Btc/unit. IMO it would be a decent point where to open a short position because it is above the previous high of 0.035 Btc/unit and in a strong uptrend i’d prefer to avoid to open a short position from a lower high. In any case it is better to confirm the trade with a bearish signal with an oscillator of your choice.
altcoin