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The article is for reference only, not considered investment recommendations
I started an experiment on November 24, when Bitcoin broke the price of $ 11k.
The goal of the experiment is to verify whether it is possible to create portfolios that are separate from the top 20 cryptocurrencies, accounting for the majority of market capitalization. Another aspect of the experiment is testing the correlation with the traditional stock market.
As of December 9, 12, all were allocated with equal capital (2018%) at the beginning
All portfolio components were equally considered when starting out with equal cash, starting with 100 values and being rebalanced each month. It is not possible to trade for multi-million dollar portfolios because of low liquidity for some currencies but can be adjusted for a $ 100 portfolio. I will update portfolio prices every week or so for 1 year.
Strategy of the catalog
Here are the crypto strategies that I will implement:
- Top 20 largest coins
- Payment Coin (Digital Cash)
- Coin smart contract
- The interactive coins
- Coin anonymity
The graph shows the performance of the indicators
After 2 weeks, the best investment is recorded as a portfolio of co-interactions (yellow line 100,83). In a situation where the Crypto market declines by 20% of market capitalization, this portfolio does not lose value (even increase slightly).
Top 20 Index - S&P 500 of Crypto
All coins in the top 20 of coinmarketcap: Bitcoin, Ripple, Ethereum, ...
Through this catalog, I want to create an S&P 500 version for the Crypto market.
Interestingly, the most diverse portfolio and the top 20 biggest currencies have extremely poor performance. It is an indication that the top 20 is highly correlated with each other.
Bitcoin Cash (-36%) has dragged the performance of the portfolio down. Since the hard fork on November 15, a major market sell-off has occurred causing panic in the market.
Coin payment closely follow the Top 20 Index
A digital or virtual currency designed to act as a medium of exchange. These coins use cryptography to secure and verify transactions and to control the creation of new units.
This coin accounts for almost most of the market capitalization, including Bitcoin accounting for 55%.
Since its inception, the market has experienced great losses and when these occur, Bitcoin is often used as a defensive tool.
So it's no surprise that Bitcoin has the best performance (-5%), while Stellar loses more than 15% of its value.
It has very similar characteristics to the Top 20 Index, with very close returns and volatility. Most of the top 20 coins are payment coins, digital currencies.
Coin smart contracts
Ethereum, EOS, Cardano, NEO, Tezos, Aeternity
Smart contracts are self-executing contracts with terms of the agreement between buyer and seller written directly into lines of code. Smart contracts not only define rules and penalties related to an agreement in the same way as traditional contracts, but can automatically enforce those obligations.
As of December 9, this is the worst performing portfolio, with most coins losing between 12% and 10% since the start of the test. Ethereum and Cardano are hedging risks, with losses accounting for only 40 -12%. While EOS is the worst performer, losing nearly 13% in less than 37 weeks.
EOS loses the most, coins start with 16,67% but after 2 weeks EOS only accounts for 13,6%
Overall, from the outset, this portfolio has underperformed. Smart contract coins have seen a lot of hype over the past 2 years, ICO companies sold their ETH to fund the operation, it has put downward pressure on prices and the trend doesn't seem to be over yet. .
Anonymous Coin - High Beta
Monero, Dash, Zcash, Verge, PIVX, Horizen, Zcoin
Anonymous Coin is a cryptocurrency that provides users with a higher level of anonymity, users will conduct transactions on the blockchain without any financial details being made public.
The anonymous coin portfolio is highly volatile, coupled with a high beta (correlated with the market), which outperforms the market as both markets go up and vice versa.
The performance of coins in this category is also extremely opposite from -23% to 17%.
Interactive Coin - Highest performance
AION, ARK, ICON, WANCHAIN
Interactive coins have the ability to easily share information and transactions between Blockchain systems. In a fully compatible environment, if users from another blockchain send you something on your blockchain, you will be able to read, understand and interact with or reply to it.
With the information recorded on December 09, this is the best performing portfolio, it outperforms the Top 12 Crypto Index.
On the other hand, it only includes 4 coins, resulting in this category being the most volatile.
AION is the best performing coin.
Tether, USDC, GUSD, DAI, TUSD, PAXOS
Stablecoins are a cryptocurrency designed to minimize the effects of price volatility. The value of a stablecoin can be pegged to fiat currency, or to exchange traded goods (such as gold, silver, etc.). Stablecoins can be centralized where they can be backed by fiat money or in a decentralized fashion through leveraging other cryptocurrency projects in different ways.
The portfolio is stable between 99,5 and 100,5 as one might expect.
Cryptocurrency markets diversify to traditional markets
The correlation table has shown
The above mentioned crypto categories have an almost 1: 1 correlation (0,89 - 0,99).
Except for the Stablecoin category.
The above mentioned Crypto categories are negatively correlated with the traditional market (-0,53 to -0,06).
Traditional market products are positively correlated.
This shows that it will be difficult for these crypto portfolios to separate over time. The good news is that cryptocurrencies can help diversify your traditional market portfolios. The correlation between the top 20 cryptocurrency indices and the S&P 500 index is -0,21, meaning you can reduce your losses on conventional markets by investing some of your money in. electronic money and vice versa.
According to Traderviet / medium
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