How to distinguish the real demand for money from a regular pump?

To predict the price movements of the cryptocurrency very difficult. However, the market analysis can help traders understand the probability of accomplishment of any of the events above. Here it is also worth noting the nature of the dependence of almost all altcoins of the price movement of Bitcoin and their individual performance according to the type of the number of active addresses, transactions, trading volume and other things. In some cases, correlations — that is, the connection of these quantities, you can benefit immensely.

How to analyze the cryptocurrency market?

Analysts Coin Metrics visually represented the Pearson correlation coefficient between the top 20 CoinMarketCap cryptocurrencies. The only time not taken into account stabilini and project Cosmos, which researchers have no complete data.

Recall that the Pearson correlation coefficient — an indicator of linear dependence between two variables X and Y, which takes values from -1 to 1. At correlation -1 X inversely proportional to Y, or Vice versa. That is, when one variable increase the other decreases. The coefficient takes the value 1 when an increase in X increases Y.

In the diagram below, the purple color indicates the correlation of the price of the crypto currency in dollars relative to the number of active addresses. Pink columns represent the dependencies between price and number of transactions in the blockchain.

The correlation between transaction price, active addresses and know. Source: Coin Metrics

Data for Bitcoin is to be expected: from the main coins can you expect high value, because she has a lot of transactions in the blockchain and active users. The higher these indicators, the higher the demand for money, hence the higher price and in limited supply.

The other coin is not so clear. For example, Bitcoin Cash Bitcoin and SV have virtually no correlation between the above variables, as their coefficients are close to zero. Accordingly, the recent growth of BSV on a minimum of 150 percent can be considered ordinary at the pump — that is an artificial increase. But Binance Coin, TRON and Tezos observed average level of dependence. Note that statistics active addresses Monero is not because of the anonymity of the blockchain cryptocurrency, which is why purple’s style XMR is missing.

See also: Bitcoin still not linked to changes in the price of gold.

As the diagram Coin Metrics reflected the full history of each coin, compare them with each other a bit unfair. In the diagram below, which shows the same data is used from 1 January 2018 to 12 January 2020. This need for more direct and accurate comparison for some of the oldest coins from the collection. Although we note that several of these cryptocurrencies under two years of age.

The correlation between transaction price, active address and the rate in the period from 2018 to January 2020. Source: Coin Metrics


Of course, one should not draw conclusions about the future of the project, just based on the history of dependency between the metrics. However, they can tell how the growth of one or another Aldona is "healthy", that is caused by real demand from real users and not just another pump. At least to improve its value must correspond to the baseline — that is, the activity of the owners of the coins.

It is important not to forget that attempts to guess future price movements of the cryptocurrency usually end in failure. Here we can recall the sixteen representatives of the industry who were doing their betting on BTC value at the beginning of 2020. Of these, only two people were relatively right. Although they somehow guessed a figure, because to predict the future is still impossible.

And the forecasts themselves — a topic for discussion. Some think they are detrimental to the industry of cryptocurrencies, others do not agree with this. Read more view expert set out in a separate article.

More interesting look at our cryptodata millionaires.

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