Kimchi-premium and other Secret indicators of the cryptocurrency market
Hello, fellow traders, holders and crypto enthusiasts!
The cryptocurrency market provides an excellent opportunity to increase equity. According to the observations of the portal Holdcalc.com, almost 98% of Bitcoin sessions over the entire history ended daily trading in plus.
This is a fantastic result that no financial or commodity instrument can boast, however, according to unofficial statistics from cryptocurrency exchanges, 90% of traders reset their own accounts during cryptozyme - Bitcoin fell by 80% during 2018.
In today's article, we will get acquainted with non-standard indicators for forecasting the Bitcoin exchange rate, see how effective and accurate they are, and whether they can complement (or replace) the classical technical analysis.
Unlike the main cryptocurrencies, altcoins and tokens lost more than 90% of the cost, many speculators kept most of the funds in these digital assets because of the high growth potential of cryptocurrencies compared to Bitcoin in the 2017 rally.
Now the cryptozyme is over, a ten-year history of market trading in digital assets gives hope for the restoration of the value of Bitcoin and altcoins and reaching new highs. In addition to hope, it would not hurt investors and speculators to have indicators that predict:
- The advent of cryptozymes;
- Pivot points of the fall;
- The likelihood of a deep correction.
As such indicators, you can use some anomalies in the cryptocurrency market discovered by analysts, as well as adapting the tools for technical analysis of stock indexes and the Forex market to Bitcoin price and trading data.
Kimchi Bitcoin Award
At the end of 2017, analysts unexpectedly discovered a discrepancy in the value of Bitcoin on South Korean cryptocurrency exchanges with other sites, for example, in the USA, where Coinbase, the world leader in the number of trader accounts, appeared on the market.
This persistent phenomenon, observed for three consecutive months, is called "kimchi awards".
The discrepancy in the price of Bitcoin was formed by successive circumstances:
1. The expulsion of cryptocurrency exchanges and a ban on the circulation of digital currencies in China;
2. The heyday of crypto trading in South Korea, which took a share of 25% of the global Bitcoin trade;
3. The campaign of the Government of the Republic of Korea aimed at the "nationalization" of cryptocurrency exchanges.
By nationalization is meant the requirement of the authorities to local sites for total verification of accounts. Instead of checking the documents provided by customers, exchanges were forced to open accounts only to customers served by banks in South Korea. So the government guaranteed for itself the passage of verification accounts by all the rules (KYC and AML), but actually closed the site for foreign traders.
The formed kind of “domestic market” gave rise to the kimchi prize, which “came to naught” in early March 2018 and was forgotten.
In June 2019, the kimchi premium was restored, which forced experts to present this spread indicator as an indicator of cryptozyme. The largest discrepancy with the global average price, which reached the spread of $ 1000, is registered on the Korean Gopax exchange.
As you can see from the graph above, this is not enough to establish a stable rally in the Bitcoin market, last year during the sharp rise in Bitcoin, the difference started from $ 2000 and steadily increased. The June situation recalls exactly the same case that arose two years ago. The Kimchi Prize first appeared in May 2017 and immediately waned.
A similar picture is observed at the moment: the cost of Bitcoin has become equal on world exchanges and exchanges in Korea, after which the BTCUSD rate has fallen by 40%. In June 2017, after the kimchi premium was reduced to zero, the cryptocurrency market also adjusted by 50%.
How to use the kimchi indicator to predict the decline of the Bitcoin exchange rate
The main problem of using the indicator is the lack of a ready-made graphical model. A trader will have to independently fix the presence / absence of a difference in BTC quotes on exchanges in South Korea.
Use the data of the analytical resource CoinMarketCap, where you can fix and observe daily:
1. The average market value of BTC by opening the first page of the site;
2. Find the cost of a pair of BTCKRW, automatically converted into US dollars on major exchanges in Korea: Bithumb, Coinone, UPbit, Corbit.
The signals of the kimchi indicator are better evaluated in the numerical values of the spread (thousands of US dollars) in order to be able to compare with historical data. The growth threshold can be exceeded by the level of $ 2000 in the presence of a stable (five daily values) trend to increase this indicator.
- Double daily fall of the indicator - a signal for a possible correction as soon as possible;
- The disappearance of the spread after rising above $ 2000 per week is a sign of cryptozyme.
In this case, the trader should stop investing in the market, close some recently opened positions, and take steps to hedge the rest of Bitcoin.
Dr. Doom indicator
Professor of Economics Nuriel Roubini, widely known for predicting the 2008 crisis and nicknamed "Dr. Doom", is a consistent critic of the cryptocurrency market. In 2018, the scientist thoroughly investigated the issue of USDT token and came to the conclusion that it was the issue of this digital asset that saved Bitcoin from a major collapse for half a year.
Many experts then criticized the statements of Nuriel Rubini, but the second half of last year fully proved the correctness of the most influential economist according to Forbes.
Tether USD is the first stablecoin in the world invented by Bitfinex, the cryptocurrency exchange has long been hiding its authorship by opening Tether Ltd in offshore, hiding its beneficiaries. The issued token was equated to the US dollar, promising customers a constant direct and reverse exchange.
It was carried out at the expense of the accepted fiat currency, for the amount of which the USDT issue was launched. Its amount could be checked on the blockchain; fiat US dollars were checked by the audit. A tight peg to the dollar made it possible to trade tokens on other exchanges that kept the cryptocurrency rate close to 1 to 1 with USD.
The evidence is on the chart of CoinmarketCap, a cryptostatistics site that collects information on 20,000 sites. Since the spring of 2015, USDT has been pegged to the US dollar.
If you open the Tether USD capitalization chart, you can see how the continued growth in token issuance affected the cryptocurrency market decline, the “flood of cryptocurrencies” could stop panic sales and even organize rebounds.
In the fall, Tether Ltd and Bitfinex started having problems with the servicing bank, which forced them to drastically reduce their capitalization by withdrawing fiat and destroying tokens. At the same time, the BTC rate collapsed to the minimum annual values, proving the correctness of Roubini.
Thanks to his observations, traders can track the release of USDT tokens using the capitalization curve for the medium-term forecast, and the fact of release for the short-term entry into the market.
In both cases, one should take into account the increase or decrease in capitalization from $ 100 million, with medium-term monitoring, a daily analysis of the chart is suitable. After the release of the USDT emissions are distributed on exchanges within three days, then the market follows its own trends.
The issue does not guarantee mandatory medium-term growth, but within three sessions, attempts to push the Bitcoin rate down will be bought out by market makers.
You can instantly track the issue of tokens, constantly monitoring the blockchain and the addresses of smart contracts. This is somewhat problematic, given the fact that Tether has increased the number of platforms and standards for the issue of stablecoin, now the company uses the Bitcoin, Ethereum and Tron blockchains.
In order not to sit on the blocks of three platforms in browsers, use the Whalepool service, which sends important crypto statistics about large transfers, including Tether emissions on any blockchain, in messengers using bots. Messages have a link to learn more about the event.
Bitcoin Investor Fear Index
Market statistics show that with the growth of the stock market, investors begin to feel greed. In an attempt to maximize profits, they neglect hedging, protecting the position.
In the stock market, stop-loss is not used directly, as traders open positions in options. The absence of stops leads to reduced volatility of their prices, which are taken into account using the VIX, called the fear index.
During strong stock market growth, greed makes investors forget about fear (VIX is low) and stops. As a result, a deep correction turns into a panixale. Stock indices are waiting for a collapse, which works like a domino effect, greatly reducing the value of other assets.
Bitcoin, like the stock, is sought after by investors for the holding in order to profit from a constant increase in value. It is believed that blockchain technology and widespread decentralization allow BTC to be classified as "digital gold", the price of which will only increase over time.
The belief in a constant increase in the value of cryptocurrencies has received a separate name - "native" (takeoff to the moon). It gives rise to a phobia of FOMO - purchases caused by a fear of not getting profit, which ensures high volatility, stable multi-day demand for Bitcoin.
Low volatility, determined by the relative readings of the VIX indicator, indicates an upcoming correction. It is believed that at values of 40 and below, traders should be wary of a collapse that unambiguously occurs after the indicator drops to around 20.
As soon as the first serious losses occur, investors recall hedging, and the increased demand for options is reflected in indicators above 60, signaling the bottom of the market.
The Bitcoin fear index is called LXVX; it is calculated at the cryptocurrency options prices by the exchange for institutional investors Ledger X. There are no “random traders” on the site, which indicates the reliability of the data for which there is no large archive of historical quotes.
The current LXVX values are encouraging, showing that Bitcoin is at the very beginning of growth, but the cryptozyme has not passed yet, investors are still too cautious, actively hedging the held BTC coins.
The past cryptozyme passed at values of the index 40-45, Bitcoin exchange rate recovery started when LXVX reached 75 points.
Bitcoin resistance and support indicator
The Ledger X cryptocurrency exchange provides an opportunity to get another indicator for determining the levels of support and resistance of Bitcoin. These are conditional price zones where there is a high probability of a rate reversal.
If quotes rise, pre-determined resistance levels serve to partially or fully take profit. If the support zone is defined correctly, in the event of a fall, you can try to make a purchase in the hope of a reversal for growth or rebound, which will allow the trader to transfer the position to breakeven by placing a pending stop loss order at the entry price.
Resistance and support levels are determined by the highest Open Interest (OI) - the number of option contracts open at a certain Bitcoin price. Its values along with the number of options are recorded in a special table.
After the column of the current date (1) is a series of options with the date of expiration (combustion / performance) of contracts (2). The contracts of the next series should be taken - in the example under consideration, this is July 26th.
The validity of contracts is a month during which the data on Open Interest can change, the values for them reflect the 6th column of the table on which we set the filter, sorting the number of contracts in descending order.
Bitcoin resistance levels define contracts like Call, support - Put. As can be seen from the table, the nearest resistance was at $ 15,000, and the support at a fall in July was provided by the level of $ 9500.
How true the testimony is, is visible on the BTCUSD chart, in July quotes were unfolding precisely from this price zone. To clarify to what depth below the support or above resistance the price can go down or rise, it is necessary to add or subtract from the price of the OI the current values of the Bid (3) or Ask (4) column.
The value of the described indicators is that they do not use "abstract formulas", they are based on real variables that are directly related to the cryptocurrency market or Bitcoin. This allows the trader to receive timely non-lagging signals, to know in advance about the upcoming pump, to reliably determine the points of a possible panixale stop.