This is what I mean when I say Litecoin Outperforms
Here we have Litecoin in black against a bevy of other cryptos including Bitcoin, EOS, Monero, and Ethereum. As can be seen, it wasn't doing great compared to its peers before the September and November 2018 setbacks, but since then has outperformed all o its peers.
Keep in mind though, these cryptos, nearly all relatively liquid cryptos really, are cointegrated. Don't confuse this with correlation. Correlation can tell us that when one asset or variable moves in one direction and another moves in that same direction, that the two are positively correlated with one another and if they move in opposite directions that they are negatively correlated. But these cryptos are doing that arn't they? Yes they are, but they are also deviating from one another more and more as time goes on. This is cointegration and it can tell us which is not if they are moving in the same direction, but that the degree to which the variables (cryptos, currencies, or other assets) are sensitive to the same average price over a period of time.
So what on earth is the relevance of this you may ask. The point is that something, we don't really know what, is impacting all of these currencies at the same time as they are all positively correlated against the US dollar and they are also cointegrating meaning. What is that hidden variable? It could just be Bitcoin as it has been arguably the 'market leader' as the main crypto most known and traded. Just take a look at this link and scroll down to the crypto correlation chart of 2018: cryptocurrencyhub.io...elation-ec492cccf79f Every crypto pair was highly positively correlated with one another in 2018, almost all of which were between 90 and 100 percent. That is actually quite unheard of in financial markets where an entire asset class is related to one another. Surely we can find correlations and cointegrations in other places in the market such as bond yields. In the US or Germany or Brazil, the 1 year, 2 year, 5 year, and 10 year bonds are all positively correlated with one another another and cointegrated with one another as well. Except, the difference is that it only holds for a single country. Sure, maybe a few countries are more closely related to one another than others, but not the entire market.
So what are the takeaways then? First, a 'diversified portfolio' of cryptos is not diversified at all. All it will do is let you know which ones are the winners and which ones are the losers which we already know from the chart starting right at you above. Then what do you want to do? Look if you're an investor, like a real investor not a crypto bro, then yeah sure maybe have a high performing crypto in your portfolio. That crypto in 2019 is Litecoin. Period end of sentence. Yes maybe this could change, but right now its Litecoin. Nothing else to say beyond this. If this changes, I will be the first one to scream it from the mountain top, but really nothing can be said to convince me that a portfolio with fifteen cryptos is any smarter than one with just the good ones.
Please please please tell me if there is another crypto out there performing much better than Litecoin and I would be more than happy to give it a look, change my worldview, and incorporate it into my analysis. I challenge you to do so. Good luck trading out there.
Also if you are enjoying my honest analysis the way I see it, please take a look at my other content at www.anthonylaurence.wordpress.com
Keep in mind though, these cryptos, nearly all relatively liquid cryptos really, are cointegrated. Don't confuse this with correlation. Correlation can tell us that when one asset or variable moves in one direction and another moves in that same direction, that the two are positively correlated with one another and if they move in opposite directions that they are negatively correlated. But these cryptos are doing that arn't they? Yes they are, but they are also deviating from one another more and more as time goes on. This is cointegration and it can tell us which is not if they are moving in the same direction, but that the degree to which the variables (cryptos, currencies, or other assets) are sensitive to the same average price over a period of time.
So what on earth is the relevance of this you may ask. The point is that something, we don't really know what, is impacting all of these currencies at the same time as they are all positively correlated against the US dollar and they are also cointegrating meaning. What is that hidden variable? It could just be Bitcoin as it has been arguably the 'market leader' as the main crypto most known and traded. Just take a look at this link and scroll down to the crypto correlation chart of 2018: cryptocurrencyhub.io...elation-ec492cccf79f Every crypto pair was highly positively correlated with one another in 2018, almost all of which were between 90 and 100 percent. That is actually quite unheard of in financial markets where an entire asset class is related to one another. Surely we can find correlations and cointegrations in other places in the market such as bond yields. In the US or Germany or Brazil, the 1 year, 2 year, 5 year, and 10 year bonds are all positively correlated with one another another and cointegrated with one another as well. Except, the difference is that it only holds for a single country. Sure, maybe a few countries are more closely related to one another than others, but not the entire market.
So what are the takeaways then? First, a 'diversified portfolio' of cryptos is not diversified at all. All it will do is let you know which ones are the winners and which ones are the losers which we already know from the chart starting right at you above. Then what do you want to do? Look if you're an investor, like a real investor not a crypto bro, then yeah sure maybe have a high performing crypto in your portfolio. That crypto in 2019 is Litecoin. Period end of sentence. Yes maybe this could change, but right now its Litecoin. Nothing else to say beyond this. If this changes, I will be the first one to scream it from the mountain top, but really nothing can be said to convince me that a portfolio with fifteen cryptos is any smarter than one with just the good ones.
Please please please tell me if there is another crypto out there performing much better than Litecoin and I would be more than happy to give it a look, change my worldview, and incorporate it into my analysis. I challenge you to do so. Good luck trading out there.
Also if you are enjoying my honest analysis the way I see it, please take a look at my other content at www.anthonylaurence.wordpress.com
Comment:
Also, to emphasize my point, I implore you to put your browser over the lower end of this chart as I seem to have pushed the X axis a bit too far into the past. This analysis holds if entry begins at August 2018 or anytime afterwards. Before August 2018, my analysis of Litecoin holds much less weight as Bitcoin competes fairly well with it with an earlier entry point closer to June 2018.