In the cryptocurrency market, data has always been a critical factor when making trading decisions. How do we cut through the data fog and uncover effective data to optimize trading decisions? This is a topic that the market continues to pay attention to. OKX has specially planned the “Insight Data” column in collaboration with mainstream data platforms such as AICoin and Coinglass, starting from common user needs, hoping to explore more systematic data methodologies for the market to reference and learn from.
The following is the content of the first issue, jointly discussed by the OKX Strategy Team and AICoin Research Institute to perceive market changes and build a “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 brings together experts in market analysis, risk management, and financial engineering, providing solid support for the strategic development of OKX with deep professional knowledge and rich business experience.
AICoin Research Institute: 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 focused on market data analysis, professional candlestick charts, signal strategy tools, asset management monitoring, and news.
Content Index
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Perceiving market changes in real-time, what are the data dimensions that must be constantly monitored?
What indicators can help users better grasp macro trends?
Timing is crucial, which data helps capture the optimal timing?
For large funds, what data should be considered to build a scientifically robust trading strategy?
Conclusion
Risk Warning and Disclaimer
AICoin Research Institute: We believe the following dimensions can help investors better understand market changes.
First, price fluctuations and trends. The latest price, real-time price changes can best indicate the current market sentiment. Next is price trends, which are usually measured by technical indicators, including common ones like MA, EMA, MACD, RSI, and various custom indicators developed by technical analysis researchers.
Second, trading volume, mainly total trading volume and large volume trades. Total trading volume can effectively measure market activity. Large volume trades mainly involve monitoring the trading situation of large accounts, for example, the buying and selling of whales may foreshadow significant market fluctuations. We have also monitored and analyzed several important data types and shared them with users for analysis and alerts, including main large orders based on CEX order book and trading data, large transactions behavior, and chip distribution.
Third, fund flows. Mainly net fund inflows/outflows: observing the flow of funds in and out can help everyone better judge the supply and demand situation in the market. Recent ETF net inflow data is a good example. We also include these data for users to reference. In addition, monitoring the flow of funds on exchanges is important to understand the buying and selling pressure in the market. Generally, reference can be made to data such as large exchange access data and exchange wallet address balances.
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 average position ratio of elite long/short, which are important references for the medium-term market trend. As a leading CEX, OKX’s open trade big data is of great reference significance to the market.
Of course, social media and news should also be monitored in a timely manner, such as Twitter, Reddit, and other social platforms and mainstream news media within the industry, which can help us capture market sentiment and potential hotspots.
Fifth, on-chain transaction 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 the addresses of smart money and the changes in project tokens in the focus of the community KOL. For tokens with POW mechanisms like Bitcoin, changes in hash rate and mining difficulty can reflect miner confidence and network security. The most critical are two points: halving period and the impact of miner shutdown prices and coin prices.
Sixth, macroeconomic data and policies, including economic indicators such as US non-farm data, CPI, etc., which help us understand the overall economic situation. 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 focusing on at least the following 4 dimensions of data:
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), which can be used to smooth price fluctuations and identify trend directions;
Relative Strength Index (RSI): measures the speed and change of price movements, identifying overbought or oversold conditions. Usually, an RSI value above 70 indicates overbought, and below 30 indicates oversold;
Moving Average Convergence Divergence (MACD): can judge the price trend changes by the difference between short-term and long-term moving averages
Second, market volatility. Volatility is an important indicator of market changes. It can assist in judging market stability and potential investment risks. Volatility is usually measured by standard deviation or the VIX index, or a comprehensive Fear and Greed Index of multiple indicators, which can comprehensively assess 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 of 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 movement of funds in the market, thereby understanding market trends. Inflow funds are orders that are executed at the ask price or higher, while outflow funds are orders that are 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 orders, big orders, medium orders, and small orders for easy viewing.
Transaction distribution shows the quantity of transactions at different price levels, reflecting the trading distribution of investors. By analyzing transaction distribution data, it is possible to understand the profitability or loss situation of investors. By comparing the current price, it is possible to distinguish between profit areas and loss areas. Key data includes the profit ratio, average cost, resistance level, support level, 90% and 70% transaction intervals, and the overlap of transaction intervals. High overlap indicates concentrated fund transaction positions 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 the technical progress of projects, tokenomics, partnerships, regulatory dynamics, etc.
AICoin Research Institute: Based on the overall market changes, we believe the following macro indicators are suitable for deep tracking by cryptocurrency traders:
First, total market capitalization. The total market capitalization of cryptocurrencies reflects the overall scale and health of the cryptocurrency market. An increase in total market capitalization usually indicates the overall development of the market and an increase in participants.
Second, Bitcoin dominance, which represents the percentage of Bitcoin’s market capitalization in the overall cryptocurrency market capitalization. High Bitcoin dominance usually indicates a decrease in market risk appetite, with investors preferring more stable assets, while a lower percentage may indicate funds flowing into altcoins. In addition, we also calculate 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 Bitcoin hash rate reflects the computing power and security of the Bitcoin network, and the miner income and expenditure balance reflects whether miners are profitable, which 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 time periods, and the inflow and outflow of funds from exchanges. Tracking the inflow and outflow of cryptocurrencies to and from exchanges can indicate increasing selling pressure or vice versa.
Fifth, stablecoin liquidity, mainly the market value and circulation of stablecoins such as USDT and USDC. The inflow and outflow of stablecoins can indicate market buying and selling pressure.
Sixth, market sentiment index, mainly looking at the Fear & Greed Index (Crypto Fear & Greed Index) and OKX’s trading big data indicators.
Seventh, decentralized finance (DeFi) data, where 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 contracts: the open interest of futures and options markets can reflect the expectations and risk exposure of market participants. In addition, funding rates, such as the funding rate in the futures market, can indicate the comparison of the strength between long and short positions. Rates and spreads are important indicators that guide large funds to arbitrage, and the relationship between the mining shutdown price and coin price is crucial.Funds balance the price difference in the market through arbitrage and provide liquidity to the market.
Ninth, the economic data and indicators in the United States, such as CPI and non-farm data, are valuable in guiding the Fed’s interest rate policy 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 of 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 and may be accompanied by significant price fluctuations. Users can analyze changes in trading volume to judge the strength and weakness of market trends and identify market peaks and troughs.
Third, the market capitalization ratio of BTC/ETH is an important indicator for understanding the market structure. When the market capitalization ratio of BTC or ETH rises, 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 the market capitalization ratio may indicate that investors are exploring more altcoin opportunities.
Fourth, the inflow and outflow of funds in ETFs can reflect the market sentiment of institutional investors. A large influx of funds into ETFs usually indicates institutional investors’ optimism about the market outlook, while fund 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, which 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 primarily refer to the following indicators:
EMA indicator: the crossover of short-term (e.g., 12-day moving average) and medium-term (e.g., 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 present a good buying opportunity.
BOLL indicator: when the price touches the lower Bollinger Band with signs of recovery, it can serve as a buying signal.
There are many types of technical indicators with diverse uses. Choosing suitable indicators for investors is 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.
Second, in the profit-taking and stop-loss stage, the following indicators can be considered:
Fibonacci retracement: Fibonacci retracement levels, such as 38.2%, 50%, 61.8%, etc., 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 average, it can serve as a stop-loss signal.
RSI: when RSI is above 70, it is usually considered overbought and a signal to consider taking profits.
In addition, for profit-taking and stop-loss based on data indicators, it is also necessary to consider trading volume and the trend of large transfers, as well as a decrease in network activity: a significant decrease in on-chain transactions and active addresses may indicate a decrease in market interest and serve as a signal to consider stop-loss. Of course, relevant regulatory policies or adverse news are important references for our investments. Finally, we also have a suggestion, which is to manage risks well: set clear profit-taking and stop-loss points, smooth the purchase price through phased position building, and regularly review and adjust with analysis.
OKX Strategy Team: We believe that holding preferences, basis, and technical indicators are valuable references.
Specifically, holding preferences (Long Short Ratio) reflect the long and short ratio of market participants. A high long ratio usually indicates optimistic market sentiment, and investors tend to buy, while a high short ratio indicates pessimistic market sentiment, and investors tend to sell. By analyzing holding preferences, users can judge the main trends and sentiment of the current market and choose appropriate timing for position building.
Basis refers to the difference between futures contract prices and spot prices. Basis can be positive (futures price higher than spot price) or negative (futures price lower than spot price). Basis reflects market participants’ expectations of 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 formulate arbitrage strategies. For example, a rapid increase in basis may indicate a bullish market sentiment, while a rapid decrease in basis may indicate a bearish market sentiment.
Technical indicators – Overbought/Oversold – allow users to determine whether the market is in an overbought or oversold state through technical indicators such as the Relative Strength Index (RSI) and Stochastic Oscillator. When RSI is above 70, the market may be overbought, and prices may undergo a correction; when RSI is below 30, the market may be oversold, and prices may rebound. These technical indicators help users choose the timing for position building during extreme market sentiment.
Lastly, there are profit/risk tools that can help users visualize and manage the potential returns and risks of each transaction. Users can set profit-taking and stop-loss points and calculate the risk-return ratio for each transaction to formulate reasonable exit strategies.
AICoin Research Institute: This question mainly depends on the capital goals and the ability to withstand risk drawdowns. Here, I will briefly analyze some arbitrage indicators suitable for large capital references:
Pay attention to the opportunities for price differences in the futures and spot markets.
Pay attention to the price differences and timeliness opportunities of the same underlying asset across different exchanges.
Pay attention to the arbitrage opportunities of contract funding rates in the market.
Pay attention to the arbitrage opportunities between on-chain and off-chain.
Pay attention to the market depth, position data, and other related underlying assets to judge 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 this type of group, commonly used tools include dollar-cost averaging strategies, portfolio arbitrage, and large order splitting. Dollar-cost averaging strategy reduces overall holding costs by regularly buying at lower prices during price declines and taking profits when prices rebound, repeating the cycle. Portfolio arbitrage is a strategy that helps users hedge and reduce trading risks. This strategy can select different or similar currencies/markets for simultaneous trading, and through market oscillations and price differences between various trading varieties, it can automatically and timely help you realize profits. Portfolio arbitrage strategy can effectively help you reduce potential losses from dealing with future market uncertainties. Large order splitting is a convenient trading strategy provided to large-volume traders. This strategy helps users split large orders into smaller orders and place them in batches. Through intelligent settings of the order, it can minimize the impact of large orders on the market and maintain a higher average transaction price level, thereby greatly reducing the trading costs for large-volume traders.
The above is the first issue of OKX’s “Insight into Data” column, 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 traders with different investment preferences.
This article is for reference only. It represents the author’s views and does not represent OKX’s position. This article does not intend to provide (i) investment advice or investment recommendations; (ii) solicitations or offers 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 experience significant fluctuations. You should carefully consider whether trading or holding digital assets is suitable for your financial situation. For your specific circumstances, please consult your legal/tax/investment professionals. Please be responsible for understanding and complying with applicable local laws and regulations.
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