Better Technical Analysis with Blockchain Indicators

Better Technical
Analysis with
Blockchain
Indicators

Agenda
❖ Gentle observations about technical analysis
❖ Technical analysis and blockchain indicators
❖ Some examples

INTRODUCING
Some gentle observations about
technical analysis….

What are the ways to analyze a
financial asset?

Evaluating
Investment
Strategies
Fundamental analysis: Based on the
intrinsic economic value of an asset
Technical analysis: Based on price trends
Quantitative analysis: Based on statistical
and machine learning models

Technical analysis is the most popular
form of investment analysis for
crypto assets

But there are
plenty of
challenges

Bias and
Imagination
Not Resilient to
Market Changes
Hard to Apply
Across Different
Assets
Ignorant of Macro-
Factor
Agenda

INTRODUCING
Technical analysis + blockchain indicators:
The theory

Main Types
of Technical
Indicators
Trend
Mean reversion
Relative strength
Momentum
Volume

Technical analysis works better when
using insights about the behavior of
individual investors

Crypto is the first
asset class to record
a relevant portion of
the investor activity
in public ledgers

Analyzing crypto assets with just price and
volume is being lazy and ignoring the data-
rich universe of this new asset class

Technical
Analysis
Blockchain
Analysis
Actionability
• Technical analysis can make many
blockchain patterns actionable in
trading.
• Blockchain analysis can reinforce
many technical analysis patterns with
empirical information about the
behavior of individual investors .
Reinforcement
Technical Analysis +
Blockchain Analysis

INTRODUCING
Technical analysis + blockchain
indicators in practice

INTRODUCING
Support/Resistance…

The TA Way:
Fibonacci
Retracement
Levels
• Identifies two key
points(peak and
through) and divides the
distance in different
levels based on the
Fibonacci series
• The different levels are
based on retracement
trends and identify
possible points of
support and resistance

A Blockchain
Complementary
Indicator: In-Out
Money Around the
Current Price
• In-Out Money Around
the Current Price
identifies profitability
levels of active
addresses at a close
distance of the current
price
• The indicator provides
objective levels of
support and resistance
based on the positions of
groups of investors

The TA Way:
Exponential
Moving Averages
• Evaluates price trends by
weighting price
observations over certain
periods of time placing
more relevance in recent
data points
• Tries to identify
divergences between the
current price and
historical averages

A Blockchain
Complementary
Indicator: Exchange
Flows
• Exchange netflows
evaluate the difference
between inflows and
outflows in centralized
crypto exchanges using
blockchain data
• Large variations in
inflows and outflows in
major crypto exchanges
are regularly reflected in
buy or sell activity
fluctuations

INTRODUCING
Mean Reversion Analysis…

The TA Way:
Bollinger Bands
• Identifies trends lines
based on standard
deviations from the price
moving average
• Looks for overbought
and oversold conditions
as well as mean-
reversion patterns based
on the distance of the
price and the target lines

A Blockchain
Complementary
Indicator: UTXO
Analysis
• Unspent transaction
outputs(UTXO) analysis
can be used to identify
the age of crypto-assets
in UTXO-based
blockchains
• UTXO analysis can
highlight movements
between crypto assets at
different age levels as a
sign of change of
sentiment in the market

INTRODUCING
Strength Analysis…

The TA Way:
Relative Strength
Index(RSI)
• Stochastic analysis
that measures the
magnitude of recent
price changes
• Identifies overbought
and oversold
conditions based on
price fluctuations
across the different
levels

A Blockchain
Complementary
Indicator: Historical
In-Out Money
• Evaluate the
profitability of groups
of investors since the
inception of a crypto
asset
• Visualizes investors
realizing gains and
losses based on the
current price

INTRODUCING
Momentum Analysis…

The TA Way:
Moving Average
Convergence
Divergence(MACD)
• Evaluates the
relationship between
two EMA levels of a
financial asset
• Is typically used to
identify momentum
trends based on the
strength of recent price
changes

Complementary
Blockchain
Indicator: Active
Addresses
• The active addresses
analysis measures the
momentum in new and
active addresses with a
positive balance in the
network
• This indicator typically
turns positive during
strong price
momentum scenarios

INTRODUCING
Volume Analysis…

The TA Way: On-
Balance
Volume(OBV)
• Accumulative indicator
that measures buying
and selling pressure
• Attempts to segment
institutional and retail
investor volume

Complementary
Blockchain Indicator:
Large Transaction
Momentum
• This indicator measures
the momentum of
disproportionally large
blockchain transactions
over short periods of
time
• Large transaction activity
is typically a strong sign
of price momentum

35
● Technical analysis patterns can be applied to time-series blockchain
indicators
● The basic formulas of some technical analysis indicators can be redefined
using blockchain indicators
Some More Ambitious Ideas

36
● In the context of crypto-assets, Technical analysis can be complemented
with blockchain based indicators
● Blockchain indicators can reinforce many of the trends spotted by technical
analysis methods
● Technical analysis can complement blockchain indicators with actionable
outcomes
● Some of these ideas could lead to a new group of crypto-specific indicators
Summary

INTRODUCING
Jesus Rodriguez
jr@intotheblock.io
medium.com/@jrodthoughts
intotheblock.com
Thank You!

Better Technical Analysis with Blockchain Indicators

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