Bitcoin currently dominates the cryptocurrency market. Its price movements often determine the price direction of altcoins. A rally in Bitcoin’s price often tends to lift prices of many altcoins, while a BTC price drop usually causes the altcoin market to bleed. Occasionally, you might see some coins move contrary to the direction of Bitcoin, but they are often the exception and not the rule.
Bitcoin entered 2019 at a depressing $3740 price point as weakness from the 2018 crypto winter continued to linger. However, the top cryptocurrency has managed to deliver an incredible 174% price gain to a high of $11,127 last week. More so, the market capitalization of the entire cryptocurrency market has climbed 161% from $125 billion to $327 billion YTD.
The last few weeks have been significant, especially w.r.t to Bitcoin’s YTD performance. BTC was trading in the $7700 to $8300 range for majority of June’s first two weeks. However, from June 12 Bitcoin began rallying massively. It registered an outstanding 43% gain and broke out above the $10,000 psychological resistance until it hit a 15-month high of $11,246.
The recent bullish trend in Bitcoin has been attributed to a number of factors:
- Introduction of Facebook’s Libra,
- Growing interest of Wall Street in cryptocurrencies,
- An unintended consequence of the crackdown on Bitcoin in India,
- FOMO as people came to the realization that Bitcoin is gradually edging back up
The role of technical analysis in cryptocurrency trading
While BTC scored 174% YTD gains, the chart below says a few things. It says that the number of Bitcoin transactions per day only increased by 46% year-to-date while the number of on-chain transactions appreciated by only 52% in the same period. Two possible explanations for this discrepancy are:
- No new money is entering the cryptocurrency market,
- Bitcoin whales are the biggest decision makers in the market
Disparity in the number of Bitcoin transactions during the rally from last few days and the sporadic flash crashes suggests that institutional traders and whales rule the market. Unfortunately, simple tools such as stop-losses and limit orders are becoming increasingly ineffective against large-scale market manipulations.
The cryptocurrency market has only been around for about 10 years, and technical analysis has consistently proven to be a better way to participate in the market than fundamental analysis.
For retail traders who want to compete effectively against whales, AI-powered automated trading strategies are becoming increasingly important to increase the odds of success in the cryptocurrency market.
Below are three startups which are currently at the forefront of automated trading in the cryptocurrency market.
Alphanu is a marketplace for subscribing to powerful trading algorithms created by professional traders, fund managers, and developers. Algo trading is becoming popular all over the world. More than 85% of trades in the U.S. are computerized and the Asian market is rapidly catching up too.
Alphanu is created to serve as a platform for traders to access trading algorithms (designed by professionals), without having to incur the huge costs which previously restricted algo trading access for institutional players.
Through Alphanu, retail traders and investors will be able to access an ecosystem of the best traders, investors, data scientists, and developers. This access will reduce the unfair advantage enjoyed by institutional investors and democratize the odds of success in the financial markets. Interestingly, the Asian market is in dire need of democratized access to tools for algo trading.
In the words of Paul Hsu, Co-founder, CEO at Alphanu “It is the most opportune moment to capture the niche market – governments in the Asian markets are currently on the fence with regards to how they want to regulate automated trading. It is difficult for them to decide as the automation of trading is inevitable, but openly allowing it at this point will create a harmful gold rush where the winners will be big corporations (over the interests of the overall public).”
The platform will also hasten growth of the crypto market by encouraging participation of retail investors who are sceptical about adding cryptocurrencies to their portfolios. The fledgling startup believes that it can destigmatize the speculative perception about cryptocurrency trading through algorithms that take care of the technical analysis aspect required for successful cryptocurrency trading.
Hsu goes on to observe that “blockchains due to their nature as a public ledger create the necessary trust factor for a marketplace to step in and democratize algorithmic trading without becoming a “middleman” just like the hedge funds. Tokens offer a great solution to the problem of how to price limited resources on a marketplace, such as buyer attention.”
Mudrex is a marketplace to find, build, and use algorithms in trading strategies, for traders without prior knowledge of data science or coding. Through a simple layout, Mundex provides traders with an opportunity to choose trading strategies using different factors such as type of cryptocurrencies, past performance, duration of use, and volume of previous trades.
Mundex also allows traders to build their own trading strategies as a mashup of other strategies through a drag and drop feature. Traders can then backtest the efficacy of their strategies against historical data to provide them with valuable insight for optimizing the strategies for the best results.
A differentiating factor between Alphanu and Mudrex is that Alphanu seems to only list trading strategies from professional developers whereas any user can submit their trading strategy for listing on Mudrex. On one hand, Mudrex could have large number of listed strategies and on the other, potential users might be concerned about the quality of the listed strategies.
Capitalise is a tool for automating trades across different financial markets using natural human language and syntax without any prior knowledge of coding or data science. Trades on Capitalise uses everyday words to turn ideas into fully automated trades using ‘If This, Then That’ protocols.
A typical trade could be written as “Buy 2.1 BTC if price breaks above last day high and 24 hours volume is above the daily average volume by 50%. Close position if the profit is at 25% or if the RSI is below the 5 days MA”
Capitalise is designed to be integrated with trading accounts on different third-party exchanges, brokers and trading platforms so that traders can manage all their trades in one place and take control over their trading. Capitalise also allows trading strategies to run in a loop, which in turn serves as a long strategy for automating entries and exits.
Amir Shiovich, CTO and cofounder of Capitalise observes that “the future of trading will see the consolidation of crypto and traditional markets . . . By bringing traditional trading and crypto trading onto a single, all-in-one platform, Capitalise allows users to automate their strategies based on data from both the crypto and traditional markets, then execute those strategies.”
Images courtesy of Shutterstock, YCharts
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