Insight Data Issue 01｜AICoin OKX: How to quickly perceive the crypto market and build a data methodology?

In the cryptocurrency market, data has always been an important tool for people to make 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 continues to pay attention to. This time, OKX specially planned the Insight Data column, and jointly with mainstream data platforms such as AICoin and Coinglass, based on common user needs, we hope to dig out a more systematic data methodology for market reference and learning.

The following is the first issue of the content, in which the OKX Strategy Team and AICoin Research Institute jointly discussed how to perceive market changes and build a data methodology . We hope it will be helpful to you.

OKX Strategy Team: The OKX Strategy Team is composed of a group of experienced professionals dedicated to promoting innovation in the field of global digital asset strategies. The team brings together experts in multiple fields such as market analysis, risk management and financial engineering. With deep professional knowledge and rich business experience, it provides solid support for the strategic phát triển of OKX.

AICoin Research Institute: AICoin Research Institute is based on the AICoin platform and is committed to providing in-depth data interpretation and investor education to Web3 users. AICoin is a Web3 data servđá provider that focuses on market data analysis, professional K-line, signal strategy tools, asset management monitoring, and news.

1. In order to perceive market changes at the first time, which types of data dimensions must be paid attention to at all times?

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. Real-time price changes can best indicate the current market sentiment. The second is price trends. Price trends are usually measured by technical indicators, such as 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 effectively measure market activity. Large transactions mainly look at the trading situation of large investors. For example, the buying and selling of whales may indicate major market fluctuations. In the past, we have also monitored and analyzed several types of important data and opened them to users for analysis and early warning, including major large orders, large transaction behaviors, and chip distribution based on CEX market and transaction data.

Third, the flow of funds. Mainly net inflow/outflow of funds: observing the inflow and outflow of funds can help everyone better judge the supply and demand situation in the market. The recent ETF net inflow data is a good proof. If a large amount of ETF funds flow in, it means that the market is still an incremental market. We have also collected such data and shared it with the majority of users for reference. Another is the flow of funds in exchanges. It is necessary to pay attention to the fund trends of major exchanges and understand the buying and selling pressure in the market. Generally, the exchanges large deposit and withdrawal data and the balance of the exchange wallet address can be used as a reference.

Fourth, observe market sentiment and social media trends. Look at market sentiment indicators, such as the Fear Greed Index. I would like to recommend OKX’s contract data indicators, such as the ratio of long and short positions, the average long and short positions of elites, etc., which are of great reference value for short- and medium-term market trends. As a leading CEX, OKX’s open trading big data is of great reference significance to the market.

Of course, we should also pay attention to social media and news in a timely manner. Social platforms such as Twitter, Reddit and mainstream news media in the circle can help us capture market sentiment and potential hotspots.

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

Sixth, macroeconomic data and policies, including economic indicators such as US non-farm data and CPI, help us understand the general economic trend. In addition, changes in regulatory policies in various countries have a direct impact on the implementation and promotion of the crypto market in the current country, and are also one of the indicators of market growth and decline.

OKX Strategy Team: It is crucial for users to perceive market changes. We recommend paying attention to at least the following four dimensions of data:

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

in particular:

• Moving Average (MA): including Simple Moving Average (SMA) and Exponential Moving Average (EMA), which can be used to smooth price fluctuations and identify trend direction;

• Relative Strength Index (RSI): It measures the speed and variability of price changes and identifies overbought or oversold conditions. Typically, an RSI value above 70 indicates overbought conditions, and below 30 indicates oversold conditions.

• Moving Average Convergence Divergence (MACD): The difference between the short-term and long-term moving averages can be used to determine the change in price trend

Second, market volatility. Volatility is an important indicator of market changes. It can help determine market stability and potential investment risks. Volatility can usually be measured by standard deviation or VIX index, or by the fear and greed index that combines multiple indicators (including volatility), which can also more comprehensively assess market sentiment and potential volatility.

Third, capital flow and transaction distribution . Comprehensive analysis of capital flow and transaction distribution can quickly understand the overall capital movement and cost distribution of the market, and then more accurately judge market sentiment, price fluctuations and key support and pressure levels.

Among them, the flow of funds is an important indicator for judging market sentiment and trends. By monitoring the inflow and outflow of funds, investors can understand the overall movement of funds in the market and thus understand the market trend. Inflows are orders executed at the ask price or higher, and outflows are orders executed at the bid price or lower. Net inflow of funds is equal to inflow minus outflow. The size of a single inflow of funds is sorted by the transaction amount, which can be divided into extra-large orders, large orders, medium orders and small orders for easy viewing.

The transaction distribution shows the number of transactions of the target at different prices, reflecting the transaction distribution of investors. By analyzing the transaction distribution data, you can understand the profit or loss of investors. By comparing the current price, you can distinguish the profit area and the loss area. Key data include profit ratio, average cost, pressure level, support level, 90% and 70% transaction intervals, and transaction interval overlap. A high interval overlap indicates that the funds are concentrated in the transaction position and the price fluctuation is small. Following up on these data can more accurately judge market trends and price changes.

Fourth, fundamental data. For the cryptocurrency market, fundamental data includes the project’s technological progress, tokenomics, partnerships, regulatory dynamics, etc.

2. Which types of indicators can help users better grasp the changes in macro trends?

AICoin Research Institute: Based on the overall changes in the past market, we believe that the following macro indicators are suitable for crypto traders to track in depth:

First, the total market value. The total market value of cryptocurrencies reflects the size and health of the entire cryptocurrency market. The growth of the total market value usually indicates the overall development of the market and the increase in participants.

Second, BTC Dominance represents the proportion of Bitcoins market value to the total cryptocurrency market value. A high Bitcoin market value share usually indicates a lower risk appetite in the market, with investors preferring more stable assets, while a lower share may indicate that funds are flowing into altcoins. In addition, we also counted the Ethereum market value share, which is also a similar indicator worth paying attention to.

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

Fourth, liquidity and trading volume, including the trading volume of cryptocurrency exchanges in different periods of time, and the inflow and outflow of funds from the exchanges. Tracking the flow of cryptocurrencies in and out of exchanges, a large amount of funds flowing into the exchange may indicate an increase in selling pressure, and vice versa.

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

Sixth, the market sentiment index mainly depends on the Crypto Fear Greed Index and OKX’s trading big data indicators.

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

Eighth, the key to derivatives market data is the open interest volume: the open interest volume in the futures and options markets can reflect the expectations and risk exposure of market participants. There are also funding rates, such as the funding rate in the futures market, which can indicate the power comparison between long and short parties. Rates and spreads are important tool indicators to guide large funds to arbitrage, and large funds balance the market spread through arbitrage while also providing liquidity to the market.

Ninth, the United States economic data and indicators, CPI and non-farm data: The value of these two indicators lies in guiding the Federal Reserves interest rate hike policy and predicting the direction of total capital inflows and outflows in the market.

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

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

Second, the overall market volume reflects the markets activity. High volume usually means high market sentiment, which may be accompanied by large price fluctuations. Users can judge the strength of market trends and identify market peaks and troughs by analyzing changes in volume.

Third, BTC/ETH market capitalization share. The market capitalization share of BTC and ETH is an important indicator for understanding market structure. When the market capitalization share of BTC or ETH rises, it may indicate that market funds are more concentrated on these two major cryptocurrencies, which is usually regarded as a signal of market risk aversion. On the contrary, a decline in market capitalization share may indicate that investors are exploring more alts coin opportunities.

Fourth, the inflow and outflow of funds in ETFs. The inflow and outflow of funds in cryptocurrency ETFs can reflect the market attitude of institutional investors. Large amounts of funds flowing into ETFs usually indicate that institutional investors are optimistic about the market outlook, while fund outflows may indicate that institutions have weakened confidence in the market. Analyzing the fund movements of ETFs can help users judge the medium- and long-term trends of the market.

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

3. Timing is the key to success. What data can help capture the best opportunity?

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

First, in the position building stage: it is recommended to refer to the following indicators:

• EMA indicator: Crossovers of short-term (such as the 12-day moving average) and medium-term (such as the 26-day moving average) moving averages can indicate buying opportunities, such as a golden cross (a short-term moving average crosses over a long-term moving average)

• RSI indicator: When the RSI is below 30, it is usually considered to be in the oversold zone, which may be a good opportunity to buy

• BOLL indicator: When the price touches the lower Bollinger Band and shows signs of recovery, it can be used as a buy signal

• There are many types of technical indicators and they have a wide range of uses. A single indicator is a profound subject. As an investor, you can choose the indicator that suits you.

• In addition, in terms of data indicators, we need to understand: trading volume, number of active addresses and new addresses, number of on-chain transactions, and trends of major large orders

Secondly, in the stop-profit and stop-loss stage, you can refer to the following indicators:

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

• EMA: A price break below a key moving average, such as the 120-day or 250-day moving average, can serve as a stop-loss signal.

• RSI: When the RSI is above 70, it is generally considered to be in the overbought zone and is a signal to consider taking profits.

In addition, if you use data indicators to set stop-profit and stop-loss, you should also understand the trading volume and large transfer trends, as well as the decline in network activity: the number of transactions and active addresses on the chain has dropped significantly, which may indicate a decrease in market interest and is a signal to consider stop-loss. Of course, relevant regulatory policies or unfavorable news are of great reference significance to our investment. Finally, we have another suggestion, which is to do a good job of risk control: set clear stop-profit and stop-loss points, build positions in batches to smooth the purchase price, and reduce the risk of a single position; and review and adjust regularly, and think and gain.

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

Specifically, the Long Short Ratio reflects the long-short ratio of market participants. A high long ratio usually indicates that market sentiment is optimistic and investors tend to buy; a high short ratio indicates that market sentiment is pessimistic and investors tend to sell. By analyzing the long-short ratio, users can determine the main trends and sentiments of the current market and choose the right time to open a position.

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

Technical indicators – Overbought/Oversold, through technical indicators such as the Relative Strength Index (RSI) and the Stochastic Oscillator, users can determine whether the market is in an overbought or oversold state. When the RSI is above 70, the market may be overbought and the price may pull back; when the RSI is below 30, the market may be oversold and the price may rebound. These technical indicators help users choose the time to open a position when the market is extremely emotional.

Finally, there are profit/risk tools, which help users visualize and manage the potential profit and risk of each transaction. Users can set take-profit and stop-loss points, calculate the risk-reward ratio of each transaction, and formulate a reasonable exit strategy.

4. For large funds, what data are needed to build a scientific and stable trading strategy?

AICoin Research Institute: This question mainly depends on the funding goals and the ability to withstand risk drawdown. Here I will briefly analyze some arbitrage indicators suitable for large funds:

• Pay attention to the price difference opportunities between futures and spot and futures in the market

• Pay attention to the price difference and timeliness opportunities of the same underlying asset across exchanges in the market

• Pay attention to the arbitrage opportunities of contract funding rates in the market

• Focus on arbitrage opportunities on and off the chain

• Pay attention to the market depth, position data, etc. of the corresponding target in the market to determine whether it can accommodate large funds for arbitrage

• Pay attention to the stability of the exchange. For example, large platforms like OKX can better accommodate arbitrage operations of large funds.

At present, AICoin provides arbitrageurs with analysis and early warning of the above multiple data dimensions, hoping to provide an effective reference for the trading community.

OKX Strategy Team: According to our observation, the asset allocation of large capital users is more diversified. For this group of people, commonly used tools include fixed investment strategy, combination arbitrage and large order splitting. Fixed investment strategy reduces the overall holding cost through periodic purchases, combination arbitrage reduces transaction risks through hedging arbitrage, and large order splitting reduces market impact and transaction costs by splitting large orders into small orders. These strategies, combined with their respective characteristics, can help large capital users to diversify their allocations more efficiently and achieve stable investment goals.

The fixed investment strategy (multi-currency portfolio, regular purchase) is a strategy to reduce the overall holding cost through periodic purchases. Continue to buy in batches at low prices during the price decline, and sell at a profit when the price rebounds, repeating the cycle over and over again, and continuously circulating arbitrage.

Combination arbitrage is a strategy that helps users hedge and arbitrage and reduce trading risks. This strategy can choose to trade different or the same currencies/markets at the same time, and automatically and promptly help you take profits by taking advantage of market fluctuations and the price difference between various trading products. Combination arbitrage strategies can effectively help you reduce the potential risk of losses in response to future market uncertainties.

Large order splitting is also a convenient trading strategy for large traders. This strategy can help users split large orders into small orders and place orders in batches. Through the intelligent setting of the strategy, the impact of large orders on the market can be minimized, while maintaining a higher average transaction price level, thereby greatly reducing the transaction costs of large traders.

Phần kết luận

The above is the first issue of the Insight Data column launched by OKX, focusing on the core issues encountered in trading, such as the perception of market changes and how to establish scientific trading strategies. We hope to provide traders with a systematic data methodology to better grasp the pulse of the market and make wise trading decisions. In future series of articles, we will continue to explore more practical data usage/analysis methods to provide references for traders with different investment preferences to learn investment.

Risk Warning and Disclaimer

This article is for reference only. This article only represents the authors views and does not represent the position of OKX. This article is not intended to provide (i) investment advice or investment recommendations; (ii) an offer or solicitation to buy, sell or hold digital assets; (iii) financial, accounting, legal or tax advice. Holding digital assets (including stablecoins and NFTs) involves high risks and may fluctuate significantly. 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 situation. Please be responsible for understanding and complying with local applicable laws and regulations.

This article is sourced from the internet: Insight Data Issue 01｜AICoin OKX: How to quickly perceive the crypto market and build a data methodology?

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