Following the release of BTC and ETH in Qidax as its inaugural cryptocurrencies in recent launch, consideration was made in the future inclusion of other types of cryptocurrencies.
Since the inception of cryptocurrency the quest to find a framework for fundamental analysis and token valuation is made possible by using the historical data of each crypto asset of its kind. While some investors have experience in predicting and anticipating the economic growth of certain crypto asset classes, there is no clear indication of the correlation among these assets.
The distinct lack of publicly available financial metrics or regulated information of any kind means that accurate judgements are hard to make on which cryptocurrency to choose from. Qidax has designed a fundamental analysis framework to study on the performance of some of the top cryptocurrencies in the market and examine on their correlations.
Top crypto assets
The following figure depicts the performance of different type of cryptocurrencies against BTC. Between 2014 and 2018, it can be seen most of the crypto assets have relatively weak correlation when compared to BTC. The correlation between LTC and BTC is highest among other crypto classes until early 2017. From 2018 onwards to mid of 2018, majority of these crypto assets including ETC, XLM, ADA, XRP, ETH, XMR, BCH and LTC are seemed to converge to the value of 0.7–0.9 with BTC. From the perspective of an investor, a strong correlation between most crypto assets is not a good sign, akin to keeping all eggs in one basket.
More crypto classes were introduced since 2015, starting from XMR, followed by XRP, then in the following year, ETH. For each introduction of these crypto coins, they come with functional intrinsic value. These projects claim some sort of revolutionary blockchain system for changing the future of humanity. Most often, these are the sentiment factors that affect the performance of crypto assets.
Qidax explores further on crypto assets by studying multiple cryptos’ pairs. A correlation heat map is built to look at the correlation on each crypto asset compared against each other. Among the crypto pairs, the highest correlation was seen at EOS and BCH at 0.9893 followed by EOS and LTC at 0.9827. The least correlation pair of crypto is ADA and EOS, recorded at -0.0015. ADA is the crypto asset that shows the least correlation with other crypto products.
A closer look at ADA reveals that ADA is showing a different behaviour when compared to the rest of the crypto assets. This is particularly pronounced between June to July in 2020 through the surging profile during this period.
From the tokenomics analysis perspective, the major precipitating factor is due to the upcoming Shelly mainnet migration in ADA product. ADA, the blockchain’s native cryptocurrency has shown signs of strong rally as a result of its past development activity. Fundamentally, a token with good tokenomic factor is a token that becomes desirable by all stakeholders of the ecosystem including its clients, users, suppliers, sponsors and investors.
What is Qidax’s role in its crypto product?
Day trading through application of technical analysis can be extremely beneficial but mastering those skills would require effort and time. Random investment in crypto product may increase investor’s vulnerability to investing in either low quality projects ended up with decaying value over time or even scam ICO scheme.
Mid-long term investing in high quality cryptocurrency projects is Qidax’s goal for its customer in making sure their portfolio grows and their engagement in supporting the entire cryptocurrency eco-system. At Qidax, we carefully identify the crypto products by accessing its historical performance as well as looking into its future potential value.
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