How do you spot whether a Crypto is being manipulated versus whether it’s having a really good run-up on the back of solid fundamentals? Furthermore, how can you spot a Crypto that is about to make big moves?
The answers to these questions are something of the Holy Grail in Blockchain, a place occupied by about 10% core devs like myself and where the others are mostly these days just day-traders and middle-managers chancing their luck on another wallet app.
As holy as these answers may be, finding them is comparatively easy. Today I am going to walk you through a very simple exercise using the Top 3 Cryptos – which is to say Bitcoin, Ripple and Ethereum – to show you what a steady climber, a manipulated price and a price that is about to soar upwards looks like.
Let’s use the standard variable to start with; that is the steady climber. This is Bitcoin.
One of the ways we can best tell whether something out of the ordinary is going on is to compare the volume/market cap data and see if there’s any unusually high spikes in volume relative to the increase in price. A solid increase in price should not be accompanied by an extraordinary sustained increase in the volume/market cap data, since the price increase should be offset by the volumes achieved to get it there.
As you can see from the excel data which I obtained from CoinMarketCap, there is nothing really out of the ordinary here at all volume/market cap-to-price-wise. After a big run-up throughout late last year, Bitcoin’s price seems to have steadied quite a bit.
I’ve used a standard deviation calculation (STDEV function in excel) to determine whether there really is anything out the norm going on as well. A low standard deviation (that’s the amount the day-to-day volume/market cap data varies from each day) of 1.3%, with a 55%-45% share of up/down (volume/market cap versus average) days is nothing to write home about.
Bitcoin is an incumbent Top 3 Crypto and we can be pretty sure that is where it will remain.
Now let’s take a look at our new Top 2 Crypto, XRP:
Sorry to say this to all those XRP hopefuls out there, but this is market manipulation 101, guys. First, take a look at the Quarter Pounder sized standard deviation I have circled first. Every single day, Ripple’s volume/market cap ratio differs on average by roughly 200% from the day before. Compare that to Bitcoin’s differentiation and that is a whole 100x away from a standard Crypto event. So while there may have been a 1000% increase in the Ripple price, the daily volume relative to that price has varied by another 10x that amount.
You only gotta wonder, who’s shoving the money under this rug right now to push XRP into second place? Second thing to notice here is that the number of days where the volume/market cap was above the average compared to below the average is actually lower than Bitcoin’s. That means on the days when the price was pushed with extra cash juicing up the game for Ripple, they really went at it hammer-and-tong. My guess is that there is a giant dump ahead, and lots of tiny investors are gonna be ruined for another year’s worth of Crypto trading. Personally, I hate Crypto like this, and I would want it banned if I wasn’t such an ardent decentralist at heart.
Oh well, where there is money there will always be filthy bull%$£*ers un-making great stuff others have sweat blood and tears making, I guess.
In every cloud there’s a silver lining, and so it is with ETH.
Ethereum is the real deal. That was the main reason I agreed to join the Futereum Foundation project (the ed. is going to kill me for putting that, but it’s a fact).
Let’s look at Ethereum, currently the world’s third largest Crypto and soon to be the world’s largest by far:
Here you can see that since the start of December, ETH has had a spectacular run up to 2018, soaring just shy of 100% in value. As a result, the number of days that the volume/market cap ratio of the digital currency is up is about 20% over the standard, falling in at 66% which I have circled again here.
What’s notable however is this increase in price is not accompanied by some sort of pump-and-dump game by big banks, but is remarkably steady. The average daily volume/market cap ratio is 3.6%, while the low end comes in at about 4% and the upper end is around 4.25%. What this means is that ETH is trading its own book without any outside help and still it’s climbing 2x over where it was at the start of the month. This is the same thing exactly that happened with Bitcoin at the start of 2017.
The Wise Man Calculates First
The takeaway here is I guess that you should always think before getting a FOMO reaction worked up like an LBGT such I am used to get worked up at a forthcoming release of a Scissor Sister’s release. Use data when you trade. Devs are probably more sophisticated with this sort of analysis than most to be fair, because we spend our whole lives absorbed in the detail of datametrics, but that doesn’t mean anyone isn’t capable of performing these simple calculations, no software required.
Be wise and calculate before you trade.
Editor’s Note: Emily Bianchi is a member of the Futereum Foundation Board of Directors