Among the various tools that have been built in order to help our community to move in the cryptocurrency market, the first one that has been released is our forecast. It aims to use seasonality to predict the market trend of various cryptocurrencies.
Seasonality is a factor that has been studied for decades in the traditional market. We have decided to apply it to analyze the trend of three cryptocurrencies – Ripple, Bitcoin, Ethereum. The Forecast is continuously updated, we encourage you to use it and understand if it meets your needs!
Thanks to the Forecast, you can generate a plot that displays the likely market trend of some cryptocurrencies in a given period at your choice. For first, you have to choose what to display:
1) In the “pair” box you can choose the pair to analyze (BTC/USD, ETH/BTC, XRP/BTC),
Seasonality needs of a large history in order to work at its best. BTC / USD is the pair with the largest history. For the same reason, we use pairs against BTC for ETH and XRP as both coins have been listed against Bitcoin for a longer time. The algorithm needs to have as many years of history available as possible, in order to better analyze the past market patterns of cryptocurrencies.
We are evaluating the possibility of adding new pairs.
2) In the “timeframe” box you can choose which times to consider: 4 hours, 1 day or 1 week. For intervals smaller than a week, it is difficult to clearly see the seasonality at work. You can of course use the 1-day or 4-hour timeframes to get more details on the monthly movement, but we do not recommend concentrating on intraday movements.
3) “Date from” and “date to” allows to choose which time range to consider. You can generate forecasts up to 30 December 2020, soon we will also add the first months of 2021.
When you have completed the setup, click on “generate” to get the analysis you need.
The Forecast will generate a graph that displays the likely price trend based on seasonality. The graph displays a general trend: We recommend not to focus on all the ups and downs of the graph, but to study the direction of the general trend.
Two important recommendations:
1) This chart should not be interpreted as a “buy” or “sell” signal – the forecast doesn’t provide trading signals. It is a statistical indicator that we recommend to use in order to confirm or not your analysis.
2) Pay attention: seasonality is a long term concept. Don’t use it for scalping or daily trading. In this case, there is no doubt that fees and costs due to liquidity will have a greater impact than seasonality. Indeed, on average, monthly movements spotted by Forecast are no more that 10%-20% price movements. This means that we are speaking about 0.5% daily variations: If you consider buying and selling, and then you calculate twice the costs of transactions and the fact that you can’t buy or sell at the best possible price, it is clear that riding short-term seasonal trends is very unlikely. Also, consider that seasonality is a statistical concept. Sometimes it is right, sometimes it isn’t, so you have to consider a greater margin for further losses.
By using seasonality, we aim to study and predict the market trend and provide a very useful tool for anyone interested in cryptocurrencies.
Of course, the market behavior does not exactly correspond to the seasonal model: the markets are dynamic, unpredictable and change over time. The forecast is a statistical indicator, and so it cannot be perfect like all the other market indicators, but seasonality is still a valid support to be taken into account for any market analysis. For example, you can find here some insights on market psichology that can help you while using the forecast.
This tool is subject to continuous maintenance and revision. We hope it will be useful! If you have any other doubts, do not hesitate to contact us on our telegram italian or international chat. The article will be updated as we receive your feedback!