It’s been a while since we’ve updated, but I wanted to share the slice of the crypto universe I’ve been following/investing in.
This is a good snapshot of both the general universe I am concerned with, and a bit of insight into how it act.
The last 24-hours have been the home of a quick correction/liquidation pattern. You’ll see this A LOT in crypto markets after you follow them for a while. This is what a market-wide correction (2021/9/6th-7th) looks like….
A few things of note here. First up, there’s a reason I have DAI listed first and at the top. I’ve noticed over time that ALL of these types of corrections have a “DAI Spike” at the beginning of them. This has to do with the way that the DAI smart contract functions. DAI is a stable-coin that is highly collateralized. When market start to sharpen, it has to prepare itself by calling in some ETH. This, with gas prices as they are, tends to help create even more market tension as everyone rushes to get their transaction into a block before things go nuts.
This is *why* (to my understanding) centralized exchanges that have their own infrastructure (i.e. Coinbase) have so many issues during huge market turns. The nature of blockchains like ETH and how exchanges deal with them (i.e you can swap ETH for whatever on Coinbase *without* any gas fees) means there is a mediating layer between the Layer 1 transactions and whatever the exchange is doing to keep things straight on their end.
Why does the market move together like this? There are at least 10 Layer 1’s all moving at the same time???!
Let me show you a couple pictures. This is from “Coin Particle” a wonderful dataviz tool. It’s an ugly red day today, but this is how most folks “look” at the market….like all things are “equal”.
But this view hides the actual market. This is what all of these look like when compared to Bitcoin, by market cap.
If you *exclude* BTC to see actually see some other projects, you can do that…but you are ignoring the big dog in the room.
And when the big dog barks *everyone* reacts.
One things to remember about “crypto markets” in the 21st century…there are LOTS of BOTS. Some trades are straight-up no-brainers, a few lines of computer code can analyze the market, move assets and take advantage of “arbitrage”. This is happening CONSTANTLY AT LIGHT SPEED. This is why they all move together, because, at some level, they are all paired BTC.
When BTC moves, it creates opportunities in all the others that haven’t moved yet, so the bots swoop in and do their thing. Fast.
While AI can *certainly* be used to develop *future* trading strategies, what it really excels at is taking advantage of *current ones*. So the market moves together when it moves fast.
NOTE: We’ll revisit this BTC-Dominance question again in the future. All screenshots taken on 2021/9/7 around noon MT time.
NOTE2: Why did BTC dump like that? Lots of reasons, the main one being a big sell, which often triggers cascading liquidations. But this post isn’t exploring that, it’s about how and why those big moves affect everything else.
UPDATE: I mentioned gas fees being odd for Coinbase…WEELL…this is what they look like right now…
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