Relative Returns

All good things must come to an end! The month of February started off strong, rivaling the price increases of January 2020. However, hopes of the next massive Bull run came to a halt just before February 16th and then “confirmed” on February 19th. Shortly before, Bitcoin prices fell by almost $1000 on some of the exchanges, recording a drop of 7% in mere hours. This was followed by another sharp drop of a bit more than the previous drop on February 19th. Both of these moves were triggered by heavy sell pressure from liquidations originally stemming from BitMex which then moved on to several other exchanges. Most other projects followed the heavy downwards move in even greater fashion. The avalanche of falling prices should not be a new sight for people following the market, however it is also not always a comforting signal. Projects were up as much as almost 60% for ETH at mid month, but then ended up falling into the negatives for all but one.

The end of the month paints a picture previously seen after a sudden price move. The majority of projects are now moving in tandem, with only small percentage gain differences between them. Again the outlier here is Ethereum which had important trading targets hit towards mid February. The bulls were able to fight off the sell pressure much better than the rest of the market. Things might be looking up at Ethereum.

Ethereum was the “star” this month, finishing the month off as the only asset with a positive relative return, with Litecoin being the underperformer, just slightly worse than Stellar.

February 2020, Biggest Changes

10-Hour Rolling Volatility

It seems to be a recurring trend that volatility increases towards the middle of the month. For the second month in a row Bitcoin has been the least volatile project out of the covered ones. However, following BTCs volatility shows that the markets are still moving (somewhat) in tandem and experience spikes and troughs at similar times.

On February 6th, Tron had an abnormally large spike in volatility. Prices of Tron spiked shortly after the dinner between Justin Sun and Buffet. If that is hopeful thinking by the market or if they took Buffets $4.5 million investment into Sun's charity as a positive sign for Tron is not clear, but unfortunately even that surge did not keep Tron in a positive margin by month's end.

The biggest volatility spike was shortly after February 19th, shortly after one of the biggest “flash crashes” we have seen in crypto lately. Most projects fell on the 19th, with BitMex liquidations kicking off the selling frenzy. Bitcoin prices fell more than 7% in hours, but the effect on other projects was even larger. The drop in prices that day was large enough, for most, to wipe out all the progress that had been made in the first two weeks of the month.

Now we are in a similar situation as we were roughly two months ago. The market experienced a bit of upwards pressure, got excited, fell back and now is left wondering where the prices will go. Will we Moon soon, or will we fall even further? The most realistic scenario might be a middle ground, at least for the next while. Bulls and Bears will most likely fight it out, relatively gaining here and there, but not making a sizable impact. It will take a major event, or major sell pressure to shift the belief that a Bear market is on the horizon.

Correlations

Correlations across the board have become a lot more in-sync. We have much less outliers with high readings this month, compared to the report of January 2020.

The pairs mentioned in previous Market Overview Reports for potential Pairs Trading Strategies (ETH & LTC and EOS & LTC), are still amongst the highest correlated pairs, however a new leader has emerged this month, with XLM & XRP coming in at 0.85.

In previous reports, we have been focusing on ETH & LTC, and EOS & LTC, both had correlations above 0.8 for two months in a row. Their correlations are still high with, 0.74 and 0.8, however XLM & XRP are now standing at 0.85. With a reading like that, it is hard to ignore this pairing. Looking at previous months, their correlation was still among the highest, 0.7 on December 2019 and 0.71 on January 2020. Keep an eye out for this pairing as a potential to add to a pairs trading strategy.

Notable News & Announcements

Trump Views Crypto a Threat, Proposes Countermeasures in New Budget

Bitcoin Google Searches Surge as Crypto Bulls Gather Momentum

Sony VC Fund Joins ‘Over $14M’ Funding Round for Digital Asset Platform Securitize

About Consilium

Consilium Crypto is a big data company that provides quantitative and qualitative insights to market participants in the digital asset space, including funds, family offices and exchanges.

Consilium analyzes 17,000 trading pairs, over 1000 assets, across 50+ exchanges, and tracks trading activity to the millisecond. Our system monitors raw transaction data, as well as complete price and liquidity information from order books around the globe. These data pipelines power our core products, designed to help funds find alpha and place large orders efficiently in times of thin liquidity.

For more information, send an email to info@consiliumcrypto.ai

DISCLAIMER: Consilium Crypto Inc. research and recommendations are meant for educational purposes only and the opinions expressed do not constitute investment advice. Independent advice should be sought where appropriate. The information in this report is provided "as is" and "as available". All information and opinions expressed herein are current as of publication and are subject to change without notice. Consilium Crypto Inc. does not warrant the accuracy of the materials provided herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or fitness for a particular purpose. This document is provided for informational purposes only and should not be used for investment decisions. This is not an offer to sell or a solicitation of an offer to buy any security referenced in this document. Consilium Crypto Inc. does not provide financial or trading advice. For any questions or clarifications, please contact info@consiliumcrypto.ai.