Top coins and creating an index

The first step is to limit the number of coins that will be considered. I’ve included the top 5 coins by market cap. Following is a table of the 5 coins. The data was from July 19^th. After selecting the coins, I used the first 2 quarters of 2019 to compute the average daily trade volume in dollars is used to compute the weighting factor for an index. The factor column will be used on the closing prices each day to compute that day’s index.

Coin	Title	Price	MarketCap	AveClose	AveVol$M	Factor
BTC	BITCOIN	$10,561.32	188.283	$5,555.64	321.97	59.8%
ETH	ETHEREUM	$226.13	24.191	$175.85	107.5	20.0%
LTC	LITECOIN	$99.09	6.217	$72.00	44.68	8.3%
BCH	BITCOIN CASH / BCC	$318.86	5.708	$248.75	32.7	6.1%
XRP	RIPPLE	$0.33	32.717	$0.35	31.44	5.8%

So, what is the value of this index? Not much initially. I plan on making use of this as a factor in developing a trading scheme later. Following is an interesting graph showing data from the 1^st quarter of this year.

The top of the chart has the BTC closing prices. The other two other lines are a plot of the computed values from the linear and quadratic regressions.  The bottom group are the index values. The linear line showed both grew slowly during the period. The quadratic regression indicated an increasing growth at the end of the period.

Next I’ll start analyzing different scenarios for buying and selling bitcoins. I’ll tweet @billlanke when I post again.

Bitcoin only or others also

In my effort to develop a strategy to trade crypto currencies there is one basic question? Should I deal with Bitcoin only, or should I include some of the alternate coins. My natural instinct is to deal only with bitcoins to simplify life and the trades. However, one wouldn't want to forego some opportunities in the other coins. I looked at this question a little over a year ago and drew mixed results.

The technique I used was to look at the growth rates over periods of time of varying lengths. I looked at the top 25 coins by market cap. I was surprised that there were a few of the coins with better growth rates than BTC-Bitcoin. Following is a chart with the growth rates of the major coins.

 

The coin with the highest growth rate for each quarter is highlighted in green, and those growing faster than BTC are in yellow. An exception is made for BNB (a propriety coin only available on the Binance exchange). When it had the highest rate, the second coin is also highlighted. Note that USDT-Tether isn’t really a coin, it tracks directly to the dollar.

BTC outperformed all the other coins in at least 4 of the 6 periods. A strong indicator that selecting BTC only would not be problematic. Next I’ll narrow the field coins to simplify the effort. Follow me on Twitter @billlanke. I’ll tweet when the next post is made.