In the cryptocurrency market, data has always been an important starting point for people to make trading decisions. How can we cut through the data fog and discover effective data to optimize trading decisions? This is a topic that the market continues to pay attention to. This time OKX specially planned the "Insight Data" column, and cooperated with mainstream data platforms such as AICoin and Coinglass to jointly start from common user needs, hoping to unearth more systematic data methodologies for market reference and learning.
The following is the content of the first issue. The OKX strategy team and AICoin Research Institute jointly discussed how to perceive market changes and build a "data" methodology. I hope it will be helpful to you.
OKX Strategy Team: The OKX Strategy Team is a group of experienced professionals dedicated to driving innovation in the global digital asset strategy space. The team brings together experts in many fields such as market analysis, risk management and financial engineering, and provides solid support for OKX's strategic development with its deep professional knowledge and rich business experience.
AICoin Research Institute: AICoin Research Institute is based on the AICoin platform and is committed to providing in-depth data interpretation and investor education to Web3 users. AICoin is a Web3 data service provider that focuses on market data analysis, professional K-lines, signal strategy tools, asset management monitoring, and news.
To sense market changes immediately, what types of data dimensions must be paid attention to at all times?
AICoin Research Institute: We believe that the following dimensions can help investors better perceive market changes.
First, price fluctuations and trends. The first is the latest price. Real-time price changes can best indicate the current market sentiment. The second is price trend. Price trend is usually measured through technical indicators. Common ones include MA, EMA, MACD, RSI and various custom indicators developed by technical analysis researchers.
Second, transaction volume, mainly total transaction volume and large transactions. Total trading volume is an efficient measure of market activity. Large transactions mainly depend on the trading status of large players. For example, the buying and selling of whales may indicate major market fluctuations. We have also monitored and analyzed several types of important data in the past and opened them to users for analysis and early warning, including major large orders, large transaction behavior, chip distribution, etc. based on CEX market and transaction data.
Third, the flow of funds. Mainly the net inflow/outflow of funds: Observing the inflow and outflow of funds can help everyone better judge the supply and demand situation in the market. The recent ETF net inflow data is a good evidence. If there is a large inflow of ETF funds, it means that the market is still an incremental market. We have also included this type of data and shared it with users for reference. In addition, regarding the flow of funds on exchanges, you need to pay attention to the capital trends of major exchanges and understand the buying and selling pressure in the market. Generally available for reference are exchange large deposit and withdrawal data and exchange wallet address balances, etc.
Fourth, observe market sentiment and social media dynamics. Look at market sentiment indicators, such as the Fear & Greed Index. In particular, I recommend OKX’s contract data indicators, such as the ratio of long and short positions, the average ratio of elite long and short positions, and other indicators, which have important reference value for short- and medium-term market trends. As a leading CEX, OKX’s open big data on such transactions has important reference significance for the market.
Of course, we should also pay attention to social media and news in a timely manner. Social platforms such as Twitter and Reddit and mainstream news media in the circle can help us capture market sentiment and potential hot spots.
Fifth, on-chain transaction data, including the number of transactions, number of active addresses, etc., can help us understand the activity of on-chain activities. It is recommended to pay attention to changes in smart money addresses and changes in project tokens in the focus of community KOLs. For POW tokens such as Bitcoin, changes in hash rate and mining difficulty can reflect miners’ confidence and network security. There are two most critical points: the halving cycle, and the impact of miner shutdown prices and currency prices.
Sixth, macroeconomic data and policies, including economic indicators: such as US non-farm data, CPI, etc., help us understand the general economic trend. In addition, changes in regulatory policies in various countries have a direct impact on the implementation and promotion of the encryption market in the current country, and are also one of the changing indicators of market growth and decrease.
OKX Strategy Team: Perceiving market changes is crucial for users. We recommend focusing on at least the following 4 dimensions of data:
The first price trend, price changes are the most direct signals of market changes. Users need to pay attention to the short-term and long-term trends of prices, and use technical indicator analysis such as moving average (MA), relative strength index (RSI), and moving average convergence and divergence (MACD) to assist decision-making.
in particular:
Moving average (MA): including simple moving average (SMA) and exponential moving average (EMA), which can be used to smooth price fluctuations and identify trend directions;
Relative Strength Index (RSI): It can measure the speed and change of price changes and identify overbought or oversold conditions. Usually, an RSI value above 70 indicates overbought, and below 30 indicates oversold;
Moving Average Convergence and Divergence (MACD): Changes in price trends can be judged by the difference between short-term and long-term moving averages.
Second, market volatility is an important indicator of market changes. It can assist in judging market stability and potential investment risks. Volatility is often measured by standard deviation or the VIX index, or by a fear and greed index that combines multiple indicators, including volatility, to provide a more comprehensive assessment of market sentiment and underlying volatility.
Third, capital flow and transaction distribution. Comprehensive analysis of capital flow and transaction distribution can quickly understand the overall capital trends and cost distribution of the market, and then more accurately determine market sentiment, price fluctuations, and key support and pressure levels.
Among them, capital flow is an important indicator for judging market sentiment and trends. By monitoring the inflow and outflow of funds, investors can understand the overall movement of funds in the market and thus understand market trends. Inflows are orders executed at the selling price or higher, and outflows are orders executed at the buying price or lower. Net capital inflow equals inflow minus outflow. The size of a single capital inflow is sorted by the transaction amount, and can be divided into extra large orders, large orders, medium orders and small orders for easy viewing.
The transaction distribution shows the number of transactions of the target at different prices, reflecting the transaction distribution of investors. By analyzing transaction distribution data, investors can understand their profits or losses. By comparing current prices, it is possible to distinguish between profitable and losing areas. Key data include profit ratio, average cost, pressure level, support level, 90% and 70% trading range, and the overlap of trading ranges. A high degree of range overlap indicates that capital transactions are concentrated and price fluctuations are small. Following up on this data allows for more accurate judgments of market trends and price changes.
The fourth fundamental data, for the cryptocurrency market, fundamental data includes the technical progress of the project, tokenomics, partnerships, regulatory dynamics, etc.
What types of indicators can help users better grasp changes in macro trends?
AICoin Research Institute: Based on the overall changes in the past market, we believe that the following macro indicators are suitable for crypto traders to conduct in-depth tracking:
First, the total market capitalization. The total market capitalization of cryptocurrency can reflect the size and health of the entire cryptocurrency market. Growth in total market capitalization generally indicates overall market development and an increase in participants.
Second, Bitcoin market capitalization ratio (BTC Dominance) represents the proportion of Bitcoin market capitalization to the overall cryptocurrency market capitalization. A high proportion of Bitcoin's market capitalization generally indicates a reduction in market risk appetite and investors' preference for more stable assets, while a lower proportion may indicate an inflow of funds into altcoins. In addition, we also calculated the market capitalization ratio of Ethereum, which is also a similar indicator worthy of attention.
Third, the activity data on the chain mainly refers to the number of active addresses, the number and amount of transactions. In addition, for Bitcoin, the Bitcoin hash rate reflects the computing power and security of the Bitcoin network, and the miner balance sheet reflects whether the miner is profitable. This indicator is very important for understanding the health of the mining industry. .
Fourth, capital liquidity and trading volume, including the trading volume of cryptocurrency exchanges in different periods of time, and the inflow and outflow of funds into the exchange. Tracking the movement of cryptocurrencies in and out of exchanges, large inflows into exchanges may signal increased selling pressure and vice versa.
Fifth, stablecoin liquidity mainly refers to the total market value and circulation of stablecoins, such as the market value and circulation of stablecoins such as USDT and USDC. The inflow and outflow of stablecoins can indicate the buying and selling pressure of the market.
Sixth, the market sentiment index mainly depends on the Crypto Fear & Greed Index and OKX’s trading big data indicators.
Seventh, decentralized finance (DeFi) data. The total locked value in DeFi protocols can reflect the scale and growth trend of the DeFi market to a certain extent.
Eighth, derivatives market data, the key is the open interest volume: the open interest volume in the futures and options market can reflect the expectations and risk exposures of market participants. There are also funding rates, such as those in the futures market, which can indicate the balance of power between long and short parties. Rates and spreads are important tool indicators that guide big funds to carry out arbitrage, and through arbitrage, big funds balance the price differences in the market while also providing liquidity to the market.
Ninth, U.S. economic data and indicators, CPI and non-agricultural data: the value of these two indicators lies in guiding the Federal Reserve’s interest rate hike policy and used to predict the direction of the market’s total capital inflows and outflows.
OKX Strategy Team: We believe that users can refer to the following five key indicators:
First, the overall cryptocurrency market value. The overall cryptocurrency market value is an important indicator to measure the market size and development trend. Changes in market capitalization can reflect the overall health of the market and investor confidence. When overall market capitalization continues to grow, it usually indicates that the market is in an upward trend, and vice versa.
Second, the overall market trading volume, the overall market trading volume reflects the activity of the market. High trading volume usually indicates high market sentiment, which may be accompanied by large price swings. Users can judge the strength of market trends and identify market peaks and troughs by analyzing changes in trading volume.
Third, BTC/ETH market value share. The market value share of BTC and ETH is an important indicator for understanding the market structure. When the market capitalization share of BTC or ETH rises, it may indicate that market funds are more concentrated in these two major cryptocurrencies, which is usually regarded as a signal of risk aversion in the market. Conversely, a decrease in market cap share may indicate that investors are exploring more altcoin opportunities.
Fourth, ETF inflows and outflows. The inflow and outflow of cryptocurrency ETFs can reflect the market attitude of institutional investors. Large inflows into ETFs generally indicate that institutional investors are optimistic about the market's prospects, while outflows may signal weakening institutional confidence in the market. Analyzing the fund trends of ETFs can help users determine the mid- to long-term trends of the market.
Fifth, the economic calendar. The economic calendar includes key economic events and data releases, such as GDP data, inflation rate, interest rate decisions, etc. These macroeconomic factors have a significant impact on the cryptocurrency market. For example, rising interest rates could lead to outflows from riskier assets, while increased economic uncertainty could prompt investors to seek cryptocurrencies as safe-haven assets. Paying attention to the economic calendar helps users predict changes in macro trends.
Timing is key, what data can help capture the best time?
AICoin Research Institute: This problem can be looked at in several stages:
First, the position building stage: it is recommended to mainly refer to the following indicators:
EMA indicator: The intersection of short-term (such as 12-day moving average) and medium-term (such as 26-day moving average) moving averages can prompt buying opportunities, such as "golden cross" (the short-term moving average crosses the long-term moving average)
RSI Indicator: An RSI below 30 is generally considered oversold and may be a good opportunity to buy
BOLL indicator: When the price touches the lower Bollinger Band and is accompanied by signs of recovery, it can be used as a buy signal
There are many types of technical indicators and they have very rich uses. Just one indicator is a profound knowledge. As an investor, you can just choose the indicator that suits you.
In addition, in terms of data indicators, we need to understand: trading volume, number of active addresses and new addresses, number of transactions on the chain, and trends of major large orders
Secondly, during the stop-profit and stop-loss stage, you can refer to the following indicators:
Fibonacci retracement: Fibonacci retracement levels, such as 38.2%, 50%, 61.8%, etc., can be used to set take-profit and stop-loss points.
EMA: Price falling below a key moving average, such as the 120-day or 250-day moving average, can serve as a stop-loss signal.
RSI: When the RSI is above 70, it is generally considered an overbought zone and is a signal to consider taking profits.
In addition, if you want to take profit and stop loss based on data indicators, you must also understand the trading volume and large-amount transfer trends, as well as the decline in network activity: the number of transactions and active addresses on the chain has dropped significantly, which may indicate a decrease in market interest, so it is time to consider stop loss signal of. Of course, relevant regulatory policies or adverse news have important reference significance for our investment. Finally, we have another suggestion, which is to do a good job in risk control: set clear take-profit and stop-loss points, open positions in batches to smooth the purchase price, and reduce the risk of a single position; you should also review and adjust the market regularly, and be thoughtful and gainful.
OKX Strategy Team: We believe that position propensity, basis, and technical indicators have strong reference value.
Specifically, the position tendency (Long Short Ratio) reflects the long-short ratio of market participants. A high long ratio usually indicates optimistic market sentiment and investors tend to buy; a high short ratio indicates pessimistic market sentiment and investors tend to sell. By analyzing the position tendency, users can judge the main trends and sentiments of the current market and choose the appropriate time to open a position.
Basis refers to the difference between the futures contract price and the spot price. The basis can be positive (futures price is higher than spot price) or negative (futures price is lower than spot price). The basis reflects market participants' expectations of future price changes. If the basis is positive, it usually means that the market expects future prices to rise (contango); if the basis is negative, it usually means the market expects future prices to fall (backwardation). Basis can be used to monitor market sentiment and develop arbitrage strategies. For example, a rapidly rising basis may indicate bullish sentiment, while a rapidly declining basis may indicate bearish sentiment.
Technical indicators – Overbought/Oversold, through technical indicators such as the Relative Strength Index (RSI) and the Stochastic Oscillator, users can determine whether the market is overbought or oversold. When the RSI is above 70, the market may be overbought and prices may pull back; when the RSI is below 30, the market may be oversold and prices may rebound. These technical indicators help users choose the right time to open a position during extreme market sentiment.
Finally, there are profit/risk tools, which help users visualize and manage the potential profit and risk of each trade. Users can set take-profit and stop-loss points, calculate the risk-reward ratio of each transaction, and formulate a reasonable exit strategy.
For large funds, what data are needed to build a scientific and robust trading strategy?
AICoin Research Institute: This question mainly depends on the funding goals and the ability to withstand risk drawdowns. Here I will briefly analyze some arbitrage indicators suitable for large funds to refer to:
Pay attention to futures, futures and other price difference opportunities in the market
Pay attention to the price difference and timeliness opportunities of the same target in the market across exchanges
Pay attention to arbitrage opportunities in contract funding rates in the market
Pay attention to on-chain and off-chain arbitrage opportunities
Pay attention to the market depth and position data of the corresponding targets on the market to determine whether it can accommodate large capital arbitrage.
Pay attention to the stability of exchanges. Super large platforms such as OKX can better accommodate arbitrage operations of large funds.
Currently, AICoin provides arbitrageurs with analysis and early warning of the above multiple data dimensions, hoping to provide an effective reference for the trader group.
OKX Strategy Team: According to our observation, generally large-capital users have a more diversified asset allocation. For this group of people, commonly used tools include fixed investment strategies, portfolio arbitrage and large order splits. Fixed investment strategies reduce overall position costs through periodic buying, portfolio arbitrage reduces transaction risks through hedging arbitrage, and large order splitting reduces market impact and transaction costs by splitting large orders into small orders. These strategies, combined with their respective characteristics, can help large-capital users diversify their allocations more efficiently and achieve stable investment goals.
Fixed investment strategy (multi-currency portfolio, regular buying) is a strategy that reduces the overall holding cost through periodic buying. Continue to buy at low prices in batches when the price drops, and sell at a profit when the price rebounds. The cycle starts again and again, and the cycle of arbitrage continues.
Portfolio arbitrage is a strategy that helps users do hedging and arbitrage and reduce transaction risks. This strategy can choose to trade different or the same currencies/markets at the same time. By taking advantage of market fluctuations and the price differences between various trading varieties, it can automatically and timely help you take profits. Portfolio arbitrage strategies can effectively help you reduce the risk of potential losses in response to future market uncertainties.
Large order splitting is also a convenient trading strategy for large traders. This strategy can help users split large orders into small orders and place orders in batches. Through the intelligent setting of the strategy, the impact of the large order itself on the market can be minimized while maintaining a high average transaction. price levels, thereby greatly reducing transaction costs for large traders.
Conclusion
The above is the first issue of the "Insight Data" column launched by OKX, which focuses on core issues encountered in trading such as perception of market changes and how to establish scientific trading strategies. It hopes to provide a systematic data methodology for the trader community to better Get a good grasp of the market pulse and make wise trading decisions. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide a reference for traders with different investment preferences to learn investments.
Risk warning and disclaimer
This article is for reference only. This article only represents the author's views and does not represent OKX's position. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. Holding digital assets, including stablecoins and NFTs, involves a high degree of risk and may fluctuate significantly. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professional regarding your specific situation. Please be responsible for understanding and complying with applicable local laws and regulations.
The content of this article is officially provided and does not represent the position or investment advice of this site. Readers must make their own prudent assessments.
This article Insight Data Issue 01 | AICoin & OKX: How to quickly perceive the encryption market and build a data methodology? First appeared in Zombit.