Crypto Indicator

As the crypto asset class evolves, similar patterns and indicators
used by traders in other asset classes are emerging.

One of these is the tendency of markets to be in either “risk on” or “risk off” mode.

Investors are either willing to take on more risk through buying riskier assets,
such as tech stocks with little to zero earnings; or they are looking to take less risk,
adding either gold or U.S. Treasurys to their portfolios.

As the oldest and most liquid crypto asset, bitcoin is considered “digital gold.”

It can be exchanged for more altcoins than any other crypto and serves as the
main entry and exit point to fiat currency.

On top of that, there are thousands of merchants that accept bitcoin as payment,
providing users another exit to the crypto markets.

Bitcoin has been able to maintain crypto hegemony even through significant faults:

Transaction speeds are much slower than rivals, and fees tend to
skyrocket when the network is busy.

Many contenders have tried, but none have successfully replaced bitcoin atop the crypto throne,
and it remains the “store of value” within the crypto asset universe.

This unique position allows it to outperform other crypto assets when
investors are moving away from risk.

Bitcoin Is the Crypto “Store of Value”

To get a better understanding of investors’ willingness to take on crypto risk,
it’s possible to analyze bitcoin’s relationship to other competitors.

The second-largest cryptocurrency after bitcoin is Ethereum,
which commands a $50 billion market cap, or about one-third that of bitcoin.

Ethereum provides decentralized computational power, which can be provisioned
to build and execute smart contracts.

You can think of Ethereum as a smarter, programmable version of money.

The computers responsible for processing and validating these computations are paid in
ether, the native digital asset to the Ethereum blockchain.

In the past year, over half of all new blockchain-based projects were based on the Ethereum blockchain.

These are extremely speculative projects called utility tokens, and investors assume
more risk when they trade their bitcoin for this new token, usually through Ethereum.

(That’s not to say bitcoin isn’t speculative. Rather, it’s less speculative than c
rypto tokens such as TRON and Dentacoin.)

If bitcoin is considered the “flight-to-quality” crypto asset and Ethereum represents
more risk-taking, it follows that the Ethereum/bitcoin (ETH/BTC) spread should
indicate how much risk investors are willing to assume in the crypto markets.

A similar condition exists in the fixed-income markets, where most products
are priced at a spread to U.S. Treasurys.

When investors bid up the price of riskier assets, such as high-yield bonds,
the spread between those bonds and U.S. Treasurys will narrow.

However, when investors are less willing to take risk in the fixed-income markets,
the same spreads will widen.

Let’s take a look at the historical relationship between Ethereum and bitcoin.

The following logarithmic chart shows ETH/BTC dating back to early 2017.

Crypto Indicator

You’ll notice that ETH/BTC began 2017 around 0.0081 and then peaked at 0.1500 in mid-June,
which is about an 1,800% rally.

At the same time, the total crypto market space moved up from $20 billion to
$115 billion, or a fivefold increase.

The next significant ETH/BTC rally began in December 2017 at 0.024,
where we saw an increase of nearly 300% to 0.12 in early February 2018.

During these months, total crypto market cap rose from $300 billion
to an all-time high of $800 billion.

Since this recent peak, both the total crypto market cap and the ETH/BTC
spread have dropped significantly.

However, both started rebounding just a few weeks ago.

The ETH/BTC spread has recently rallied 20% from 0.053 to 0.063,
and the total crypto market cap rose 40% from $250 billion to $330 billion.

A Harbinger of Good Things to Come

It’s hard to predict the future.

However, most markets give us an indication as to whether or not
investors are willing to take on more risk.

For instance, stock traders look at the CBOE Volatility Index (VIX),
and fixed-income traders will look at the spread between high yield and U.S. Treasurys.

Crypto Indicator
When the VIX is low and bond spreads to Treasurys are narrow,
investors are willing to take on more risk.

In the crypto markets, it appears that the most common “risk on/risk off” crypto indicator is the ETH/BTC spread.

The recent rise in this spread might be a harbinger of good things to come for crypto investors.


Nick Johnson
Founder - Ads.Cash

P.S We are in final stages of exchange listings and good news is about to come shortly

In addition to this we are in talks with a token swap partner where you will be able to swap ads for other tokens
in crypto space

2018 will be year of adscash......

This is the most recent post.
Older Post

Post a Comment Blogger

  1. If you want to get detailed information about Cryptocurrency Exchange then Statrader is a very popular platform to find information regarding top CryptoCurrency exchange.

    LCFHC is a crypto currency (money) and a digital payment system which can be used for payment transactions on the basis of peer-to-peer without an intermediary.
    In the e-Currency Business, LCFHC COIN is about to be launched by ROTHSCHILD FAMILY with the support of the Chinese Government. The House of Rothschild is going to launch the future global e-Currency, “LCFHC COIN” business, firstly in China in Sep 2017.
    It is simple but you have to join through the Sponsor’s Manual Registration at the moment before the official launch in Sep 2017 by sent details to your sponsor
    This Free Membership and Free Coins are allowed for a limited time at the moment but no one knows how long this free offerswill last. Anyway, the good news is FREE REGISTRATION is still on, so take the chance now! After this free membership period is over you have to buy LCFHC COINS to become a global eCurrency member and user so why not get it now while it is FREE without a cost.
    FHC coin business is also adopting a network business model to secure global users. As stated, after this FREE GIVEAWAY period, you have to buy LCFHC COINS at the prevailing market value to become a member, therefore secure this free and rare opportunity now while this free registration period is still available.
    Send pm (or) fovasly@gmail.com
    Then i will send you login details

  3. Nice article, which you have shared here about the Important Crypto Indicator. This information is very useful for those who are interested to invest in Crypto Currency. If you are interested to know more about ETN Mining Pool, visit superpools.online

  4. We are certainly not advocating this kind of unlawful behavior, but the banks are aware of the possibility and some of them want to shut it down. https://bitcoinvest.cc


I would like to hear from you, know your reactions, feelings, suggestions etc as regards this post. Please be kind enough to drop a comment below. It helps alot. Thanks