Sunday, June 17, 2018

Cryptocurrencies Correlation Coeficient: Bitcoin The King

In the financial markets, the correlation coefficient is used to measure the correlation between two securities. When two stocks, for example, move in the same direction, the correlation coefficient is positive. Conversely, when two stocks move in opposite directions, the correlation coefficient is negative. (Investopedia).
 If we extend the concept to cryptocurrencies and make the measurements for the last 30 days we obtain the table above. (Thank you, John Young!) Solid green represents the max linear correlation (+1) and the solid red for no linear correlation (0). 
It is not difficult to see a small group walking in lockstep while solidly headed (dragged?) by King Bitcoin. I do have my explanation but am damn curious to learn about yours. 
Please chime in.

Wednesday, June 13, 2018

Cryptocurrency Market Manipulation via Swarm Intelligence: A Crime or Cryptomonetary Policy Tool?

Is cryptomarket manipulation via Swarm Intelligence a financial crime? In all my previous analytical notes, I have always considered the cryptomarket manipulation from a negative point of view and as a potential financial misconduct.

What if we reverse the perspective and analyze the manipulation via Swarm Intelligence in terms of a de facto implementation of cryptomonetary policies similar in their effects to those policies traditionally exercised by the Central Banks?

In other words, the use of Swarm Intelligence allows managing both the inflation and the exchange rate for every single cryptocurrency offered across the world regardless of any given nation-state jurisdiction. It also allows creating a dynamic hierarchical structure among the cryptocurrencies based on a mathematically predefined and enforced correlation coefficient to Bitcoin as the (currently) leading cryptocurrency. Therefore, it would be enough to feed core cryptobots with the needed parameters just for Bitcoin on a relatively important exchange in order to trigger in realtime a spontaneous Swarm-powered price readjustment across the markets partially thanks to the tireless work of thousands of 3rd party cryptobots running an arbitrage strategy.

If we consider the cryptomarkets especially during the last few months, we should recognize that manipulation via Swarm Intelligence has been almost in full control by clearly setting the main variables of the "cryptomonetary policies." However, we still do not know how the interest rate would be set in such a context.

At this point, the main question that comes to mind is not anymore about "how" but about *who* sets the fundamental parameters of such a "cryptopolicies framework"?

We should know that "manipulation via Swarm Intelligence" is more about the technology rather than fiat or cryptocurrency holdings. Therefore, this seems like a policy game where a "virtual whale" (as distinct from a "physical whale") with a more sophisticated army of cryptobots has the upper hand. In other words, the cryptomonetary policies are dynamically set or at least strongly influenced by those entities that advance more rapidly in the application of Artificial Intelligence to the cryptomarkets. These entities are not necessarily anything similar to Central Banks as established by traditional nation-states across the world. Nor are they easily addressable through conventional political and legal instruments.

In such a context as briefly described, any demarcation line between legal and illegal, licit and illicit, authorized and unauthorized, is totally blurred. All that pushes the analysis into uncharted waters of an ocean we still need to explore. Hic Rhodus, hic salta!

Friday, June 8, 2018

Cryptomarket Manipulation, Swarm Intelligence, and Market Stagnation: Cui Bono?

Can cryptomarkets survive the extensive manipulation based on bots running swarm intelligence? The global, massive and uninterrupted presence of 1000s of cryptobots manipulating their way throughout the globe, seems to wreak havoc across all the exchanges.
The main critical signs of this crescendo are low and stagnating prices accompanied by the weakening volume of transactions both the current and the projected ones for the upcoming quarters. The manipulation largely follows the same game plan of a couple of weekly short-breathed P&D succeeded by annoying spoofs and apparently foolish wash trades.
Some cryptobots are still profiting from yet possible arbitrage thanks to tiny but evanescent spread across the exchanges but the overall scene remains problematic.
  • A first relevant question is whether there is any actual endgame in sight for this apparent trade lullaby. 
  • The other question is whether bigger exchanges are doing some heavy lifting underneath to keep things going as they are, and why. 
  • Last but not least: Who is strategically benefiting from this enforced (temporary?) stagnation and bearish cryptomarket?