"Insight Data 01 | AICoin & OKX: How to Quickly Perceive the Cryptocurrency Market and Build a Data Methodology?"

In the cryptocurrency market, data has always been a crucial factor in making trading decisions. How can we cut through the data fog to discover effective data for optimizing trading decisions? This is a topic that the market continues to focus on. OKX has specially planned the "Insight into Data" column, and has collaborated with mainstream data platforms such as AICoin and Coinglass to explore a more systematic data methodology based on common user needs, providing a reference for the market to learn from.

Below is the content of the first issue, in which the OKX Strategy Team and AICoin Research Institute jointly discuss the construction of a "data" methodology around perceiving market changes, hoping it will be helpful to you.

OKX Strategy Team: The OKX Strategy Team is composed of a group of experienced professionals dedicated to driving innovation in the global digital asset strategy field. The team brings together experts from various fields such as market analysis, risk management, and financial engineering, providing solid support for OKX's strategic development with deep professional knowledge and extensive business experience.

AICoin Research Institute: The 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 focusing on market data analysis, professional K-line charts, signal strategy tools, asset management monitoring, and news updates.

1. In the first time to perceive market changes, what data dimensions must be constantly monitored?

AICoin Research Institute: We believe that the following dimensions can help investors better perceive market changes.

First, price fluctuations and trends. First is the latest price, real-time price changes can best indicate the current market sentiment. Secondly, price trends, price trends are usually measured through technical indicators, commonly used ones include MA, EMA, MACD, RSI, and various custom indicators developed by technical analysis researchers.

Second, trading volume, mainly total trading volume and large trades. Total trading volume can efficiently measure market activity. Large trades mainly refer to the trading situation of large holders, for example, the buying and selling of whales may foreshadow significant market fluctuations. We have also monitored and analyzed several important data types in the past and made them available for users to analyze and be alerted, including main large orders based on CEX order book and trading data, large trade behaviors, chip distribution, etc.

Third, fund flows. Mainly net fund inflows/outflows: Observing the situation of fund inflows and outflows can help everyone better judge the supply and demand situation in the market. Recent ETF net inflow data is a good example. If there is a large amount of ETF funds flowing in, it indicates that the market is still an incremental market. We have also collected and shared this type of data for users' reference. In addition, it is the flow of funds on exchanges, which requires attention to the capital movements of major exchanges to understand the market's buying and selling pressure. Generally, reference can be made to data such as large exchange deposits and withdrawals, as well as exchange wallet address balances, etc.

Fourth, observe market sentiment and social media dynamics. Look at market sentiment indicators, such as the Fear & Greed Index. We especially recommend OKX's contract data indicators, such as long-short position ratios, elite long-short average position ratios, and other indicators, which have important reference value for short- to medium-term market trends. OKX, as a leading CEX, provides open access to such large trading data, which 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, as well as mainstream news media within the circle, to assist in capturing 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 changes in the number of whale addresses and the focus of the community KOL on project tokens. For tokens using the POW mechanism like Bitcoin, changes in hash rate and mining difficulty can reflect miners' confidence and network security. The most crucial points are two: the halving cycle and the impact of miners shutting down on mining price.

Sixth, macroeconomic data and policies, including economic indicators such as U.S. non-farm data, CPI, etc., which are helpful for us to understand the overall economic trend. In addition, changes in regulatory policies in various countries have a direct impact on the landing and promotion of the crypto market in the current country, and is 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 four dimensions of data:

First, price trends, changes in price 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 decision-making.

In particular:

• Moving averages (MA): including simple moving averages (SMA) and exponential moving averages (EMA), can smooth price fluctuations and identify trend directions;

• Relative Strength Index (RSI): can measure the speed and changes of price movements, identify overbought or oversold conditions, usually RSI values above 70 indicate overbought, and below 30 indicate oversold;

• Moving Average Convergence Divergence (MACD): can determine 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 help assess market stability and potential investment risks. Volatility can usually be measured by standard deviation or the VIX index, or by the fear and greed index, a composite index of multiple indicators (including volatility), to more comprehensively evaluate market sentiment and potential volatility.

Third, fund flows and distribution of trades, by analyzing fund flows and distribution of trades, one can quickly understand the overall fund trends and cost distribution in the market, and thus more accurately judge market sentiment, price fluctuations, and key support and resistance levels.

Among them, fund flows are important indicators for judging market sentiment and trends. By monitoring the inflow and outflow of funds, investors can understand the overall trend of funds in the market, thereby understanding market trends. Inflows are orders executed at the ask price or higher, while outflows are orders executed at the bid price or lower. Net fund inflows equal inflows minus outflows. Single fund inflows are ranked by transaction amount, which can be divided into large orders, big orders, medium orders, and small orders for easy viewing.

The trade distribution shows the number of trades at different price levels, reflecting the trading distribution of investors. By analyzing trade distribution data, one can understand the profitability or loss situation of investors. By comparing the current price, one can distinguish between profit areas and loss areas. Key data includes profit ratio, average cost, resistance level, support level, 90% and 70% trading ranges, and overlap of trading ranges. A high overlap indicates concentrated fund transactions 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 technical progress of projects, tokenomics, partnerships, regulatory dynamics, etc.

2. What indicators can help users better grasp changes in macro trends?

AICoin Research Institute: Based on past market changes, we believe the following macro indicators are suitable for in-depth tracking by cryptocurrency traders:

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

Second, Bitcoin dominance, representing the percentage of Bitcoin market capitalization in the total cryptocurrency market capitalization. A high Bitcoin dominance typically 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 Ethereum's market capitalization ratio, which is also a similar indicator worth noting.

Third, on-chain activity data, mainly referring to active addresses, transaction volume, and amount. Additionally, for Bitcoin, the Bitcoin hash rate reflects the computing power and security of the Bitcoin network, while miner revenue balance reflects whether miners are profitable, both of which are crucial for understanding the health of the mining industry.

Fourth, liquidity and trading volume, including the trading volume of cryptocurrencies on different exchanges during different periods, and the inflow and outflow of funds on exchanges. Tracking the inflow and outflow of funds in the cryptocurrency market, a large influx of funds into exchanges usually indicates increased selling pressure, and vice versa.

Fifth, stablecoin liquidity, mainly the total market value and circulation of stablecoins, such as USDT, USDC, etc., the market value and circulation of stablecoins, inflows and outflows of stablecoins can indicate market buying and selling pressures.

Sixth, market sentiment index, mainly looking at the Fear & Greed Index (Crypto Fear & Greed Index) and OKX's big data indicators.

Seventh, decentralized finance (DeFi) data, the total locked value in DeFi protocols can to some extent reflect the size and growth trends of the DeFi market.

Eighth, derivative market data, the key is the open interest of contracts: the open interest of futures and options contracts can reflect the expectations and risk exposure of market participants. Also, funding rates, such as the funding rate in the futures market, can indicate the balance of power between long and short positions. Rates and spreads are important tools for guiding large funds to arbitrage, and large funds provide liquidity to balance the market spread while providing liquidity to the market.

Ninth, U.S. economic data and indicators, CPI and non-farm data: the value of these two indicators lies in guiding the Fed's interest rate policy, used to predict the direction of total fund inflows and outflows in the market.

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

First, overall cryptocurrency market capitalization, the overall cryptocurrency market capitalization is an important indicator for measuring 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 increase, it usually indicates an upward trend in the market, and vice versa.

Second, overall market trading volume, the overall market trading volume reflects the activity level of the market. High trading volume usually means high market sentiment, which may be accompanied by significant price fluctuations. By analyzing changes in trading volume, one can assess the strength of market trends, identify market peaks and troughs.

Third, BTC/ETH market capitalization ratio, the market capitalization ratio of BTC and ETH is an important indicator for understanding market structure. When the market capitalization ratio of BTC or ETH rises, it may indicate that more market funds are concentrated in these two main cryptocurrencies, which is usually seen as a signal of market hedging. Conversely, a decreasing market capitalization ratio may indicate that investors are exploring more altcoin opportunities.

Fourth, ETF inflows and outflows, the inflow and outflow of funds in cryptocurrency ETFs can reflect institutional investors' market attitudes. A large influx of funds into ETFs usually indicates institutional investors' optimism about the market outlook, while outflows may indicate a weakening of institutional confidence in the market. Analyzing the fund flow of ETFs can help users judge the medium- to long-term market trends.

Fifth, economic calendar, including 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, an increase in interest rates may lead to funds flowing out of high-risk assets, while increased economic uncertainty may prompt investors to seek cryptocurrencies as hedge assets. Keeping an eye on the economic calendar helps users anticipate changes in macro trends.

3. Timing is the key to success, what data helps capture the best timing?

AICoin Research Institute: This question can be viewed in several stages:

First, the position-building stage: We recommend focusing mainly on the following indicators:

• EMA indicator: Crossings 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 crosses" (short-term moving average crossing above long-term moving average).

• RSI indicator: RSI below 30 is typically considered oversold and may be a good buying opportunity.

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

• There are many types of technical indicators with rich applications. Choosing the right indicator that suits your investment style is sufficient for investors.

• In addition, in terms of data indicators, we need to understand: trading volume, active addresses and new address numbers, on-chain transaction volume, main large order trends.

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

• Fibonacci retracement: Fibonacci retracement levels, such as 38.2%, 50%, 61.8%, 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 typically considered overbought and is a signal to consider profit-taking.

Additionally, for profit-taking and stop-loss based on data indicators, one must also understand trading volume and trends in large transfers, as well as a decrease in network activity: a significant decrease in on-chain transactions and active addresses may indicate reduced market interest, which is a signal to consider stop-loss. Of course, relevant regulatory policies or adverse news have important reference value for our investments. Finally, we also have one piece of advice, which is risk control: set clear profit-taking and stop-loss points, smooth the purchase price by buying in batches, and reduce the risk of a single position; also, review and adjust regularly, with thought and gain.

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

Specifically, holding preferences (Long Short Ratio) reflect the long and short ratio of market participants. A high long ratio usually indicates optimistic market sentiment, with investors tending to buy; a high short ratio indicates pessimistic market sentiment, with investors tending to sell. By analyzing holding preferences, users can judge the main trends and sentiment of the current market, and choose the right position-building timing.

Basis refers to the price 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. A positive basis usually indicates expectations of future price increases (contango); a negative basis usually indicates expectations of future price decreases (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, through technical indicators such as the Relative Strength Index (RSI) and Stochastic Oscillator, users can determine whether the market is in an overbought or oversold condition. When RSI is above 70, the market may be overbought, and prices may retrace; when RSI is below 30, the market may be oversold, and prices may rebound. These technical indicators help users choose position-building timing in extreme market sentiment.

Finally, profit/risk tools, these tools can help users visualize and manage the potential returns and risks of each trade. Users can set profit-taking and stop-loss points, calculate the risk-reward ratio for each trade, and thus formulate a rational exit strategy.

4. For large funds, which data should be considered to construct a scientifically robust trading strategy?

AICoin Research Institute: This question mainly depends on the fund's goals and risk tolerance. I will briefly analyze some arbitrage indicators suitable for large funds to refer to:

• Focus on opportunities in the market, such as the basis between futures and spot prices, cross-market price differences and timeliness, arbitrage opportunities in contract funding rates, on-chain and off-chain arbitrage opportunities, and market depth and position data of corresponding targets to judge whether large funds can accommodate arbitrage.

• Focus on market stability and reliability, large platforms such as OKX can better accommodate large fund arbitrage operations.

Currently, AICoin provides arbitrage traders with analysis and alerts based on the above multiple data dimensions, hoping to provide effective reference for the trading community.

OKX Strategy Team: Based on our observations, the asset allocation of large fund users is more diversified. For this group, common tools include dollar-cost averaging strategies, portfolio arbitrage, and large order splitting. Dollar-cost averaging strategies reduce overall holding costs by buying in periodically during price declines, and can take profit during price rebounds, cycling continuously to continuously profit.

Portfolio arbitrage is a strategy to help users hedge and reduce trading risks. This strategy can simultaneously trade different or similar currencies/markets, taking advantage of market oscillations and price differences between various trading varieties for automatic and timely profit-taking. The portfolio arbitrage strategy can effectively help you reduce potential loss risks when dealing with future market uncertainties.

Large order splitting is also a convenient trading strategy provided to large traders. This strategy can help users split large orders into smaller orders and place them in batches, reducing the impact of large orders on the market while maintaining a higher average execution price level, thereby greatly reducing trading costs for large traders.

Conclusion

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

Risk Warning and Disclaimer

This article is for reference only. The views expressed in this article are those of the author and do not represent OKX's position. This article does not intend to provide i investment advice or investment recommendations; ii offers or solicitations 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 situation, please consult your legal/tax/investment professional. You are responsible for understanding and complying with applicable local laws and regulations.