Relative Returns

July was a really STELLAR month! In the report from last month there was hope for a new Bull run as well as a potential Alt Season, and the markets delivered - at least on the Bull Run.

All projects finished the month of July in the positive - by quite a large margin. Ethereum (ETH) and Stellar (XLM) finished the month with gains larger than 50%. Tron (TRX) had positive news last month about their JUST airdrop to TRX holders, however the euphoria on TRX slowed down a bit. It was still able to finish in the positive at the end of month, it is however the asset that gained the least in the month, just less than Bitcoin (BTC).

Stellar (XLM) had an especially impressive bullish beginning of the month, towering above the other projects by 2x - at times even 3x. XLM was climbing steadily until around the 17th of July. After the “breakout” of the continued trading range that held until July 6th, all projects were grabbed by Bull euphoria and ran up to 20% in the next week. Stellar on the other hand rose almost 40% in the same time, doubling the other projects returns; and it did not stop there. Stellar continued rising to a high of just above 60% in relative returns until July 17th, the rest of the pack got caught in a trading range at the same time with a slight downwards trend. The final push towards the 60% region from XLM came just after news about Samsung onboarding the Stellar Blockchain around July 15th.

Around the same time, the rest of the assets fell and recorded a decently sharp intraday drop. News from Facebook's Libra might be able to explain parts of that drop. In the same week, representatives from Facebook were required to testify before the House Financial Service Committee in Washington, DC. The general consensus was rather negative, with most of the members not optimistic about the place of Digital Currencies in the Global Economy.

The exciting part of the month was definitely the second half, where the Bulls grabbed the market by force, steadily pushing up returns on all assets until the end of the month. This resulted in percent returns that we have not seen since April of this year.

Last month there were mixed signals of an Altcoin season starting. This month, the picture is much clearer. Bitcoin (BTC) sits in the second last position of returns this month, even after cracking the crucial $10,000 level in the last week of the month and then even breaking the $11,000 mark right before the end. The other projects (besides LTC) didn’t just beat the returns of BTC, in most cases they more than doubled them! Often in these reports there is a sharp pull back somewhere in the last week of the month. Not this time, at the end of the month most projects picked up another sharp increase and are looking to continue this trend for now.

In the end, the month of July would have been one of the easier months to generate sizable returns in the Digital Asset markets by simply HODLing. With Bitcoin sitting well above the $10,000 region, there are promising signs that this euphoria might extend for a bit more. However, the current run did come a bit out the blue, and Bears might have something up their sleeves for August after all.

July 2020, Biggest Changes

10-Hour Rolling Volatility

Volatility has increased in general compared to the last two months. Similar readings were last seen in April 2020 in anticipation of the Bitcoin halving.

Stellar (XLM) had the most volatile month of all the assets, reaching the highest volatility readings in almost all spikes. Looking at the Relative Return graph for XLM, it makes sense that the volatility will also be higher than those of the other assets. Volatility can be favorable for both Bulls and Bears, however this month for XLM, it definitely played into the hands of the Bulls.

Until July 24th all volatility spikes, besides an outlier around July 7th, were below 0.01. This is very much in line with the last two months which were mostly dominated by range trading. The reading below 0.01 this month coincides with mostly range trading, which is also expected. The major outlier in the first half of the month was around July 7th, where the assets broke out of the first week's trading range and gained up to 20% in the week following. Afterwards, the market entered a trading range again that held until the major up move around the 24th of July.

On the note of “AltSeason”, Bitcoin (BTC) recorded the lowest volatility of the month, even though it broke through $10,000 and subsequently $11,000 price levels in the last week of the month. Even though BTC had the biggest dollar increase, when comparing it in percentage terms to the other projects BTC underperformed all but one. Volatility readings towards the bottom of the pack was to be expected, taking the price graph into consideration and normalizing the scale.

There are still one or two potential combinations of assets that are promising for Pairs trading, however a simple HODLing strategy would have outperformed most of, if not all Pairs strategies this month.

Correlations

The tight “Correlation square” that was present throughout the last two months cannot be found anymore.

Correlations have decreased immensely from June to July. Some drops in correlation readings are in the area of 0.3, reducing most of the values to a region of 0.5-0.7. Comparing that again to last month, the lowest reading from June is close to the highest readings of July.

Overall there are still some pairs that show decent positive correlations. The prime pair for the last months, EOS & LTC, still takes the top spot but with a reduction of 0.13 to the prior month. That drop is 13x larger than the difference between May and June.

Looking at the correlation of Stellar (XLM) to Bitcoin (BTC), it fell by 0.52 which is the largest decrease. Stellar didn't just decrease, it went from a region of positive correlation towards a region of no correlation. Taking into account the comments earlier and looking at the relative returns graph it becomes clear that Stellar had a mind of its own this month compared to the rest of the market, especially compared to BTC.

There are still one or two potential combinations of assets that are promising for Pairs trading, however a simple HODLing strategy would have outperformed most of, if not all Pairs strategies this month.

Notable News & Announcements

Cryptocurrency Exchange Kraken Adds New Banking Option for US Users

Wealthsimple to Launch Cryptocurrency Trading Feature

PayPal Picks Paxos to Supply Crypto for New Service

Facebook Won’t Rule Out Digital Currency Launch Without US Approval

About Consilium

Consilium Crypto is a big data company that provides quantitative and qualitative insights to market participants in the digital asset space, including funds, family offices and exchanges.

Consilium analyzes 17,000 trading pairs, over 1000 assets, across 50+ exchanges, and tracks trading activity to the millisecond. Our system monitors raw transaction data, as well as complete price and liquidity information from order books around the globe. These data pipelines power our core products, designed to help funds find alpha and place large orders efficiently in times of thin liquidity.

For more information, send an email to info@consiliumcrypto.ai

DISCLAIMER: Consilium Crypto Inc. research and recommendations are meant for educational purposes only and the opinions expressed do not constitute investment advice. Independent advice should be sought where appropriate. The information in this report is provided "as is" and "as available". All information and opinions expressed herein are current as of publication and are subject to change without notice. Consilium Crypto Inc. does not warrant the accuracy of the materials provided herein, either expressly or impliedly, for any particular purpose and expressly disclaims any warranties of merchantability or fitness for a particular purpose. This document is provided for informational purposes only and should not be used for investment decisions. This is not an offer to sell or a solicitation of an offer to buy any security referenced in this document. Consilium Crypto Inc. does not provide financial or trading advice. For any questions or clarifications, please contact info@consiliumcrypto.ai.