Jump to content

Crypto funds causing price movement correlations


JA8
 Share

Recommended Posts

Back in April & May this year, when the big money really started getting in to crypto, I began noticing extreme correlations between various currencies. These movements were far too fast to be replicated by human eyes and fingers, so I concluded that they were bots. At around the same time, I was approached by an organisation which, as they put it, "invested in baskets of cryptocurrencies" according to my risk appetite. They had algorithmically designated all the various cryptocurrencies as being either high risk, medium risk or low risk. They may have had other categories as well, though I can't recall all the details of the conversation. I did end up investing with them though, and got in early on a couple of ICOS for which they had some sort of preferential / promised allocation in place.

The reason I mention this is that I see it happening again. The correlations are back to being around 95%+ between various groups of currencies. For example, take a look at the price action of DGB, then compare it to SC. Similar risk profile. You will immediately see what I'm talking about. This is not human eyes and fingers, but bots automatically bidding/selling at exactly the same time to either take the price higher or lower at exactly the same time. The same is true of BTC, ETH and XRP right now - and because these appear to have a similar risk profile, they all move together. They will, of course, not move at the same time or in the same way as differently-profiled currencies.

We've just seen a huge spike up in XRP of course, and that wasn't replicated in ETH or BTC. The bots are probably employing some form of sophisticated AI which can take into account sudden decoupling events based on news/announcements. I imagine this would be some form of sentiment analysis which examines news links, the reputation(s) of the entity/(ies) posting the link; the proximity and prevalence of positive and negative keywords etc. I have built a tool like this myself in the past for a social profiling business, so I certainly know they exist. I'm not saying that the correlation will always be there... but at the time of writing, we're looking at approx 100% price movement correlation.

What can we take from this? Well. Two things: 

1. To be very on guard, watching/waiting for news or events that impacts BTC's price negatively. Such as the current battle between BTC and BCH. Be aware that ETH and XRP will move in the exact same direction in the absence of positive news. Support levels in TA do not appear to matter.

2. Someone (could be human, but probably AI) believes that these three currencies, and possibly others as well, are in exactly the same (or very very close) risk profile category, hence the correlated moves. That's either worrying or encouraging I guess, depending on your outlook.

Here is a USD chart example for past three days (faded background is Bitcoin/USD, opaque is XRP/USD). Shows a 99% price direction correlation, and a 95% price movement correlation.

correlation.thumb.jpg.4154537cd6dca8df78140ddf50731d20.jpg
 

Edited by JA8
Link to comment
Share on other sites

Is this XRP/BTC exchange?  If so, wouldnt it naturally follow, since XRP being so stable, when BTC ups or downs, the satoshis follow suit?

How about against the USD? EDIT - Forgive my simplistic chart, if you have better tools to overlay with consistent X-axis for dollars, may tell the best tale. 

 

Screen Shot 2017-12-20 at 5.11.21 PM.png

Edited by Guest
Link to comment
Share on other sites

If true, perhaps DASH and BCH are linked in the opposite risk category? Before there was BCH, there was DASH (post $50 era) which everyone hedged their bets on whenever it was thought that BTC would tumble, at least that's what i observed staring at my monitor for months.

If you had to speculate, which risk category would you say BTC is vs BCH. Seems to me that BCH and DASH would be in the higher risk category as opposed to BTC, ETH, and XRP seeing as how BTC is known by almost everyone, ETH has a use case that can't fail (ICOs), and XRP has perhaps the greatest use case humanity has seen in decades (involving how money moves). 

Link to comment
Share on other sites

4 minutes ago, Toroth said:

If true, perhaps DASH and BCH are linked in the opposite risk category? Before there was BCH, there was DASH (post $50 era) which everyone hedged their bets on whenever it was thought that BTC would tumble, at least that's what i observed staring at my monitor for months.

If you had to speculate, which risk category would you say BTC is vs BCH. Seems to me that BCH and DASH would be in the higher risk category as opposed to BTC, ETH, and XRP seeing as how BTC is known by almost everyone, ETH has a use case that can't fail (ICOs), and XRP has perhaps the greatest use case humanity has seen in decades (involving how money moves). 

Speculation shouldn't be necessary as the correlation (or lack thereof) can be seen by comparing the charts. I haven't examined closely, but I imagine that the BCH risk profile is still being modelled as there isn't enough historical data yet. But I'll take a look at it :)

Link to comment
Share on other sites

Very interesting post - there seems to be some evidence for what you suggest.

I had another theory relating to recent price movements.

Back in '99 some of the dot com stocks had market makers and one of their modus operandi was this: if they needed some serious volumes of stocks they'd spike the price downwards.

This would cause both automated sellers and nervous holders to dump stock.

The market makers then came in and hovered up the stock.

(It's kind of the opposite of pump and dump)

But what happened this week reminded me of that pattern - where we had a drop of up to 10% for a day or two which then presaged a huge sustained upswing.

This would happen if for example a stock hit the ftse250 or 100. When that happens funds are required to have a position on the stock.

Maybe there is a similar equivalent with cryptos in that if they hit a certain size funds have to take a position in them.

Edited by ProfMoriarty
Link to comment
Share on other sites

You put it much better than me but I noticed this same thing about a week ago. I took a screenshot which compares XRP to NEM. While I chose NEM, the graph is scarily similar for XLM and even ETH to a good extent. I'm sure other coins too, I didn't check others.

So my thinking was that it's these large funds that affect the price, not *directly* news events. For instance, when the Amex partnership was announced we all thought the price would go up. Crickets for about a month or so? The large investors must have not been impressed.

Interesting to see, like you said, that XRP seems to have decoupled at this point.

 

 

1 Year.JPG

Link to comment
Share on other sites

I have been watching the correlation as well and the charts for Coinbase ETH/USD; LTC/USD & BTC/USD are move perfectly in unison tonight. XRP as noted is now completely decoupled. I just took this 4 chart screen shot of all 4 coins and as you can see, the charts of all of them are identical except for XRP.  I guess the bots are doing all the trading. I'm not happy about this at all. There are times that ETH stands apart but LTC and BTC have been very closely linked.

 

 

Screenshot 2017-12-21 19.58.06.png

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share



×
×
  • Create New...

Important Information

We have placed cookies on your device to help make this website better. You can adjust your cookie settings, otherwise we'll assume you're okay to continue.