Insight into Data 01 AICoin OKX How to Quickly Perceive the Cryptocurrency Market and Build a Methodology for Data Analysis

Insight into Data 01 AICoin OKX How to Quickly Perceive the Cryptocurrency Market and Build a Methodology for Data Analysis

Insight into Data 01 AICoin OKX How to Quickly Perceive the Cryptocurrency Market and Build a Methodology for Data Analysis

In the cryptocurrency market, data has always been a key factor when making trading decisions. How can we clear the fog of data and discover effective data to optimize trading decisions? This is a topic that the market has been paying continuous attention to. OKX has specially planned the “Insight Data” column, and has joined mainstream data platforms such as AICoin and Coinglass to explore more systematic data methodologies based on common user needs, hoping to provide a reference for the market to learn from.

The following is the content of the first issue, jointly discussed by the OKX strategy team and the AICoin research institute around the perception of market changes, and the construction of the “data” methodology, hoping to be helpful to you.

OKX Strategy Team: The OKX strategy team is composed of experienced professionals, dedicated to promoting innovation in the global digital asset strategy field. The team has gathered experts in various fields such as market analysis, risk management, and financial engineering, providing solid support for the strategic development of OKX with profound professional knowledge and rich business experience.

AICoin Research Institute: The AICoin Research Institute is based on the AICoin platform, dedicated to providing in-depth data interpretation and investor education to Web3 users. AICoin is a Web3 data service provider specializing in market data analysis, professional candlestick charts, signal strategy tools, asset management monitoring, and news and information.

Table of Contents
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Perceiving market changes in real-time, what data dimensions must be constantly monitored?
What indicators can help users better grasp macro trends?
Timing is the key to success, which data helps capture the best timing?
For large funds, what data is needed to build a scientific and robust trading strategy?
Conclusion
Risk warning and disclaimer

AICoin Research Institute: We believe that the following dimensions can help investors better perceive market changes.

First, price fluctuations and trends. The first is the latest price, and real-time price changes can best reflect the current market sentiment. Secondly, price trends are usually measured through technical indicators, commonly including MA, EMA, MACD, RSI, and various custom indicators developed by technical analysis researchers.

Second, trading volume, mainly total trading volume and large transactions. Total trading volume can efficiently measure market activity. Large transactions mainly refer to the trading situation of large holders, and transactions by whales may indicate significant market fluctuations. We have also monitored and analyzed several important data types and made them open for user analysis and alerts, including CEX order book and trading data-based large orders, large transaction behavior, chip distribution, etc.

Third, fund flows. This mainly includes net fund inflows/outflows: observing the inflow and outflow of funds can help better judge the supply and demand in the market. Recent ETF net inflow data is a good example. If ETF funds flow in large quantities, it indicates that the market is still an incremental market. We have also included such data for users’ reference. In addition, it is necessary to pay attention to the flow of funds on exchanges, understand the buying and selling pressure in the market. Generally, the data that can be referenced include exchange large withdrawal and deposit data, as well as exchange wallet address balances, etc.

Fourth, observing market sentiment and social media dynamics. Looking at market sentiment indicators, such as the Fear & Greed Index. We also highly recommend OKX’s contract data indicators, such as the long/short position ratio and the average long/short position ratio of elites, which have important reference value for the medium-term market trend. As a leading CEX, the open trading big data of OKX has important reference meaning for the market.

Of course, social media and news should also be timely. Platforms like Twitter, Reddit, and mainstream news media in the industry can help us capture market sentiment and potential hotspots.

Fifth, on-chain trading data, including transaction volume, active addresses, etc., can help us understand the activity on the chain. It is recommended to pay attention to the changes in whale addresses and the changes in project tokens at the focus of community KOLs. For tokens with POW mechanisms such as Bitcoin, changes in hash rate and mining difficulty can reflect miners’ confidence and network security. The most critical are two points: halving cycle and the impact of mining shutdown price on coin price.

Sixth, macroeconomic data and policies, including economic indicators such as US non-farm data, CPI, etc., are helpful for understanding the overall economic trend. In addition, changes in regulatory policies in various countries have a direct impact on the landing and promotion of the cryptocurrency market in the current country, and are also one of the indicators of market growth and decline.

OKX Strategy Team: Perceiving market changes is crucial for users. We recommend paying attention to data in at least 4 dimensions:

First, price trends. Price changes are the most direct signals of market changes. Users need to pay attention to short-term and long-term price trends and use technical indicators such as moving averages (MA), relative strength index (RSI), and moving average convergence divergence (MACD) to assist in decision-making.

Specifically:

Moving averages (MA): including simple moving averages (SMA) and exponential moving averages (EMA), can be used to smooth price volatility and identify trend direction;
Relative Strength Index (RSI): it can measure the speed and change of price movements, identify overbought or oversold situations, and RSI value above 70 typically indicates overbought, and below 30 indicates oversold;
Moving Average Convergence Divergence (MACD): can judge the change in price trend by the difference between short-term and long-term moving averages.

Second, market volatility. Volatility is an important indicator of market changes. It can help assess market stability and potential investment risks. Volatility is usually measured by standard deviation or the VIX index, and a combination of multiple indicators (including volatility) such as fear and greed index can also comprehensively evaluate market sentiment and potential volatility.

Third, fund flows and distribution of transactions. Comprehensive analysis of fund flows and transaction distribution can quickly understand the overall fund movement and cost distribution in the market, and then more accurately judge market sentiment, price fluctuations, and key support and resistance levels.

Among them, fund flows are an important indicator for judging market sentiment and trends. By monitoring the inflow and outflow of funds, investors can understand the overall fund movement in the market and thus understand the market trend. Inflow funds are orders executed at the ask price or higher, and outflow funds are orders executed at the bid price or lower. Net fund inflow equals inflow minus outflow. The size of single fund inflow is ranked by transaction amount and can be divided into large, medium, and small orders for easy viewing.

The transaction distribution shows the quantity of transactions at different price levels, reflecting the trading distribution of investors. By analyzing transaction distribution data, you can understand the profitability or loss of investors. By comparing the current price, you can distinguish between profit and loss areas. Key data includes profit ratio, average cost, resistance level, support level, 90% and 70% transaction intervals, and transaction interval overlap. A high degree of overlap in intervals indicates concentrated fund transactions and smaller price fluctuations. Following these data can more accurately judge market trends and price changes.

Fourth, fundamental data. For the cryptocurrency market, fundamental data includes technical progress of projects, tokenomics, partnerships, regulatory dynamics, etc.

AICoin Research Institute: Based on the overall market changes in the past, we believe that the following macro indicators are suitable for in-depth tracking by cryptocurrency traders:

First, total market value. The total market value of cryptocurrencies can reflect the overall scale and health of the cryptocurrency market. The growth of total market value usually indicates the overall development of the market and the increase in participants.

Second, Bitcoin dominance. It represents the proportion of Bitcoin’s market value in the total cryptocurrency market value. A high Bitcoin dominance usually indicates a decrease in market risk appetite, with investors preferring more stable assets, while a lower proportion may indicate funds flowing into altcoins. In addition, we also track the Ethereum dominance, which is a similar indicator worth paying attention to.

Third, on-chain activity data, mainly referring to active addresses, transaction volume, and amount. In addition, for Bitcoin, the hash rate of Bitcoin reflects the computing power and security of the Bitcoin network, and miner revenue balance reflects whether miners are profitable, which is very important for understanding the health of the mining industry.

Fourth, fund liquidity and trading volume, including the trading volume of cryptocurrency exchanges in different time periods and the inflow and outflow of funds from exchanges. Tracking the inflow and outflow of cryptocurrencies on exchanges, a large inflow of funds into exchanges may indicate increased selling pressure, and vice versa.

Fifth, stablecoin liquidity, mainly the total market value and circulation of stablecoins, such as USDT, USDC, etc. The inflow and outflow of stablecoins can indicate market buying and selling pressure.

Sixth, market sentiment index, mainly looking at the Fear & Greed Index and OKX’s trading big data indicators.

Seventh, decentralized finance (DeFi) data. The total locked value in DeFi protocols can to some extent reflect the scale and growth trend of the DeFi market.

Eighth, derivative market data, with a focus on open interest in futures and options markets, which can reflect the expectations and risk exposure of market participants. And funding rates, such as funding rates in the futures market, can indicate the balance of power between long and short. Rates and spreads are important tools for guiding large funds to arbitrage, while large funds are critical for the impact of shutdown price and currency price.

Funds balance the price differences in the market through arbitrage and provide liquidity to the market.

The ninth important factor is the economic data and indicators of the United States, such as CPI and non-farm data. The value of these two indicators lies in guiding the interest rate policy of the Federal Reserve and predicting the overall flow of funds in and out of the market.

OKX Strategy Team: We believe that users can refer to the following five key indicators:

First, the overall market capitalization of cryptocurrencies is an important indicator for measuring market size and development trends. Changes in market capitalization can reflect the overall health of the market and investor confidence. When the overall market capitalization continues to grow, it usually indicates an upward trend in the market, and vice versa.

Second, the overall market trading volume reflects the level of market activity. High trading volume usually indicates high market sentiment, which may be accompanied by significant price fluctuations. By analyzing the changes in trading volume, users can judge the strength and weakness of market trends and identify market peaks and troughs.

Third, the market share of BTC/ETH is an important indicator for understanding market structure. When the market share of BTC or ETH increases, it may indicate that more market funds are concentrated in these two major cryptocurrencies, which is often seen as a signal of market hedging. Conversely, a decrease in market share may indicate that investors are exploring more opportunities in altcoins.

Fourth, the inflow and outflow of funds in ETFs can reflect the market sentiment of institutional investors. A large inflow of funds into ETFs usually indicates that institutional investors are optimistic about the market outlook, while outflows may indicate a weakening of institutional confidence in the market. Analyzing the flow of funds in ETFs can help users judge the medium to long-term trends in the market.

Fifth, the economic calendar includes key economic events and data releases, such as GDP data, inflation rates, and interest rate decisions. These macroeconomic factors have a significant impact on the cryptocurrency market. For example, an increase in interest rates may lead to capital outflows from high-risk assets, while increased economic uncertainty may prompt investors to seek cryptocurrencies as a hedge. Paying attention to the economic calendar helps users anticipate changes in macro trends.

AICoin Research Institute: This issue can be divided into several stages:

First, the position building stage: It is recommended to mainly refer to the following indicators:

EMA indicator: The crossing of short-term (such as 12-day moving average) and medium-term (such as 26-day moving average) moving averages can indicate buying opportunities, such as “golden cross” (short-term moving average crossing above long-term moving average).

RSI indicator: RSI below 30 is usually considered oversold and may be a good buying opportunity.

BOLL indicator: When the price touches the lower Bollinger Band and shows signs of rebound, it can be used as a buying signal.

There are many types of technical indicators with rich uses. Choosing suitable indicators for investors is the key.

In addition, in terms of data indicators, we need to understand: trading volume, active addresses and the number of new addresses, on-chain transaction volume, and the trend of large orders by main players.

Second, in the profit-taking and stop-loss stage, the following indicators can be referred to:

Fibonacci retracement: Fibonacci retracement levels, such as 38.2%, 50%, 61.8%, can be used to set profit-taking and stop-loss points.

EMA: When the price falls below key moving averages, such as the 120-day or 250-day moving averages, it can be a stop-loss signal.

RSI: When RSI is above 70, it is usually considered overbought and may be a signal to consider taking profits.

In addition, when setting profit-taking and stop-loss points based on data indicators, it is also necessary to understand the trading volume and the trend of large transfers, as well as the decrease in network activity: a significant decrease in on-chain transactions and active addresses may indicate a decrease in market interest, which is a signal to consider stop-loss. Of course, relevant regulatory policies or unfavorable news are important references for our investment. Finally, we have one more suggestion, which is to do risk control well: set clear profit-taking and stop-loss points, smooth purchase prices through batch position building, and regularly review and adjust.

OKX Strategy Team: We believe that holding position inclination, basis, and technical indicators have strong reference value.

Specifically, the holding position inclination (Long Short Ratio) reflects the long and short ratio of market participants. A high long ratio usually indicates optimistic market sentiment, and investors tend to buy; a high short ratio indicates pessimistic market sentiment, and investors tend to sell. By analyzing the holding position inclination, users can judge the main trend and sentiment of the current market, and choose the appropriate timing for position building.

Basis refers to the difference between the futures contract price and the spot price. Basis can be positive (futures price higher than spot price) or negative (futures price lower than spot price). Basis reflects market participants’ expectations for future price changes. If the basis is positive, it usually indicates that the market expects future prices to rise (contango); if the basis is negative, it usually indicates that the market expects future prices to fall (backwardation). Basis can be used to monitor market sentiment and develop arbitrage strategies. For example, a rapid increase in basis may indicate bullish market sentiment, while a rapid decrease may indicate bearish market sentiment.

Technical indicators – overbought/oversold – can be used to determine whether the market is in an overbought or oversold state. Users can use technical indicators such as the Relative Strength Index (RSI) and the Stochastic Oscillator to judge whether the market is overbought or oversold. When the RSI is above 70, the market may be overbought and prices may retrace; when the RSI is below 30, the market may be oversold and prices may bounce back. These technical indicators help users choose the timing of position building in extreme market sentiment.

Lastly, there are profit/loss tools that help users visualize and manage the potential returns and risks of each trade. Users can set profit-taking and stop-loss points and calculate the risk-reward ratio for each trade, thereby formulating a reasonable exit strategy.

AICoin Research Institute: This question mainly depends on the capital goals and the ability to withstand drawdown risks. Here is a simple analysis of some arbitrage indicators suitable for reference by large capital:

Pay attention to the price difference opportunities in the futures-spot and futures-futures markets.

Pay attention to the price difference and timeliness opportunities across different exchanges for the same underlying asset.

Pay attention to the arbitrage opportunities in the funding rate of contracts.

Pay attention to the arbitrage opportunities between on-chain and off-chain.

Pay attention to the market depth, position data, and other indicators of the corresponding underlying assets to determine whether they can accommodate large capital arbitrage.

Pay attention to the stability of exchanges. For example, large platforms like OKX can better accommodate large capital arbitrage operations.

Currently, AICoin provides analysis and alerts based on multiple data dimensions mentioned above, hoping to provide effective references for the trader community.

OKX Strategy Team: Based on our observations, the asset allocation of large capital users is more diversified. For such users, common tools include dollar-cost averaging strategies, portfolio arbitrage, and large order splitting. Dollar-cost averaging strategy reduces the overall holding cost by regularly buying in during price declines and taking profits during price rebounds. Portfolio arbitrage reduces trading risks through hedging arbitrage, while large order splitting reduces market impact and trading costs by splitting large orders into smaller orders. These strategies, combined with their respective characteristics, can help large capital users achieve efficient diversified allocation and achieve stable investment goals.

Dollar-cost averaging strategy (multi-currency portfolio, regular buying) is a strategy that lowers the overall holding cost by periodically buying at low prices. It involves continuously buying in during price declines and taking profits during price rebounds, repeating the cycle to achieve continuous arbitrage.

Portfolio arbitrage is a strategy that helps users hedge and reduce trading risks. This strategy can choose to trade different or similar currencies/markets at the same time, using market oscillations and price differences between various trading varieties to realize automatic and timely profit-taking. Portfolio arbitrage can effectively help users reduce potential losses in response to future market uncertainties.

Large order splitting is a convenient trading strategy provided to large traders. This strategy helps users split large orders into small orders and place them in batches. Through intelligent settings, the strategy minimizes the impact of large orders on the market while maintaining a relatively high average execution price, thereby greatly reducing the trading costs of large traders.

The above is the first issue of the “Insight Data” column launched by OKX, focusing on the perception of market changes and how to establish scientific trading strategies. In future articles, we will continue to explore more practical data usage/analysis methods to provide references for different types of traders’ investment learning.

This article is for reference only. This article represents the author’s viewpoint and does not represent the position of OKX. This article does not intend to provide (i) investment advice or investment recommendations; (ii) offers or solicitations to purchase, sell, or hold digital assets; (iii) financial, accounting, legal, or tax advice. Holding digital assets (including stablecoins and NFTs) involves high risks and may experience significant volatility. You should carefully consider whether trading or holding digital assets is suitable for you based on your financial situation. Please consult your legal/tax/investment professionals for your specific circumstances. Please take responsibility for understanding and complying with applicable local laws and regulations.

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