Breaking Down this Move

Now that we have been given a slight hiatus in this market rally, we would like to look at the overall performance of the asset class at a whole, or BETA, as well as break down the relative gains for the individual coins, or ALPHA. The total market cap in crypto is currently at ~$173 Billion USD. The 7-day performance of the total market cap is ~+17%. This move was certainly encouraging for the bulls as you can see in the chart below this move was made on HIGH volume.

A 17% return over the course of a week would certainly be wonderful, however the only way to have such gains would to be long an index or construct your own diversified basket of cryptos that gave exposure across the board. An active trader will certainly not have a passive portfolio linked to an index. They will look for ALPHA, and have a heavier weight to specific coins they like, versus those they don’t. Other strategies could even include a long/short crypto portfolio that seeks much higher returns than simply the asset class’ total market cap performance. Here is a 7-day breakdown of the top cryptos all with market caps over $1 Billion USD.

This chart gives us a quick glance at the desirables and undesirables within the space. We shall keep an eye on those that have had very strong rallies (Bitcoin Cash, Litecoin, Dash, Cardano, Bitcoin SV) to see if they can hold their gains, or if they retrace from the selling pressure of those looking to lock in profits.

We will also keep an eye on the weaker coins (XRP, Tron, Stellar, ETH) to see if they can “catch-up” to the leaders of this rally, or if their weakness is truly a sign of the markets lack of interest in them.

At this juncture, we would not want to make an knee-jerk comments regarding these spreads, only that we have had a large move in the overall space, and keeping track of these leaders and laggards can be very important for future trading opportunities.

Last week we wrote a LTC/ETH Trading Pair piece with the thought process in mind that this pair would ‘mean-revert’. A mean-reversion trade is rarely successful on a break-out move, which we experienced this week. LTC has been outpacing ETH since the start of 2019. This trend has NOT changed, in fact, on this week’s large rally, that trading pair has continued the move out in that same direction. Fading these types of breaks-outs in an outright token or a spread/trading-pair can be painful and potentially disastrous trade idea. As they say, “do not try to catch the falling knife.”

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