r/BitcoinMarkets

r/BitcoinMarkets

About thirty days ago I shared a chart on Price Discovery in this sub. There was a lot of interest in it and I promised to explain in detail a Bitcoin price discovery algorithm.. I do so in this post.

*this text post is a slightly shorter version of what I wrote in my blog.

TL;DR

I applied price discovery algorithms to 5 Min OHLCV data from Bitmex and CME contracts and Bitstamp, Coinbase, HitBTC, Kraken, Poloniex, Binance, and OkEx BTCUSD/BTCUSDT markets from March 2016 to May 2020. Some exciting results I got was:

  • Before the 2017/18 bull run, Bitfinex dominated the price discovery process. They started the run. But as the price increased, trades on other exchanges, Binance and Bitstamp played a more dominant role in leading the price up.

  • Since then, CME Contracts and Bitmex contracts have had an increasing role in price discovery. Today Bitmex and CME Contracts play the most substantial role in determining the direction of Bitcoin price.

  • In 2020, market dominance by Bitmex has been negatively correlated with price. Dominance by Bitfinex, Huobi and OkCoin has had high positive correlation with price.

Introduction

Price discovery is the overall process of setting the price of an asset. Price discovery algorithms identify the leader exchanges whose traders define the price. Two approaches are most famous for use in Price Discovery. Gonzalo and Granger (1995) and Hasbrouck (1995). But they assume random walk, and a common efficient price. I do not feel comfortable assuming random walk and common efficient price in Bitcoin Markets. So I used this little know method by De Blasis (2019) for this analysis. This work assumes that “the fastest price to reflect new information releases a price signal to the other slower price series.” I thought this was valid in our market. It uses Markov Chains to measure Price Discovery. Without going into the mathematical details the summary steps used was:

  • Data is first grouped into a daily interval. Then inside each daily interval’s 5-minute candles, the change in prices between the current time t and previous time t-1 is calculated. The difference across the same time t across all exchanges in a given day is juxtaposed to create an initial matrix.

  • The initial matrix is used to create a Transition Matrix, which measures the probability of price changing to something else at time t+1 for its state at t.

  • Then other Markov Chain based algorithms are used to measure the influence an exchange at time t had over all other exchanges’ price movement at time t+1 individually.

Source: www.reddit.com


Now on Poloniex: Chromia

Now on Poloniex: Chromia

Poloniex

Chromia (CHR) is now available on Poloniex!

CHR wallets are now open and you can begin depositing CHR and trading CHR/BTC, CHR/TRX, and CHR/USDT.

We’re giving away 150,000 CHR to the first 100 customers who deposit at least 15,000 CHR into their account! Deposit CHR now for your chance to win. Prizes will be distributed within two weeks after the trading competition ends on May 29th.

What is Chromia?
Chromia is a new blockchain platform for decentralized applications, conceived in response to the shortcomings of existing platforms and designed to enable a new generation of decentralized applications to scale beyond what is currently possible. Chromia is both a blockchain and a relational database. This means that dapps can be written in a way that is familiar to developers all over the world, whether they work on large enterprise applications, games, or smaller projects. Learn more about Chromia on their website.

CHR Stats
Price: $0.01807435
Market Cap: $5,930,871
Market Rank: #298
24h Trading Volume: $1,700,849
7d Low / 7d High: $0.01760797 / $0.01871550
All Time High: $0.113379 (May 29, 2019)
All Time Low: $0.00874003 (March 13, 2020)
Circulating Supply: 327,972,901 CHR

Source: medium.com

Author: Poloniex


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Source: bitcoinist.com

Author: Nick Chong


r/BitcoinMarkets

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