Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
Coinbase’s new tools help the new crypto market entrants get a proper understanding of how seasoned traders use different signals to formulate their trading strategies and make informed decisions.
When it comes to bringing better services to its customers, Coinbase has always been committed to its goals. The US-based crypto exchange has recently unveiled some new data tools and trading signals for investors.
Basically, these tools help entry-level investors better understand how seasoned traders pick signals to trade in the crypto markets. The three trading signals unveiled by Coinbase are top holder activity, typical hold time and popularity, and price correlation.
Coinbase said that these new data tools will feature alongside the traditional market data. The crypto exchange notes that these insights are “the first of their kind in crypto.” In its official blog post, Coinbase wrote:
“The top holder activity signal is the percentage of Coinbase customers with large balances of an asset (top 10%) who have net increased (bought) or decreased (sold) their positions in that asset through trading over the last 24 hours. This is updated approximately every 2 hours.”
In a word with CoinDesk, a Coinbase spokesperson said that the top trader activity will reflect the aggregation of all individual Coinbase accounts while excluding the institutional ones.
On the other hand, the typical hold time signal represents the median number of days of holding a crypto asset before being moved to a new transaction. While the asset popularity is determined by the number of users holding the particular crypto asset. Coinbase says that all these tools are available absolutely for free to its customers.
All these metrics help users to comprehend the user-behavior in an anonymous as well as aggregated form. This ultimately helps them to make better decision to formulate the right trading strategies. A company spokesperson said:
“For individual investors, especially those new to crypto, we hope these new signals will encourage more informed management of a diversified crypto portfolio. We want trading signals to help first-time investors build the right portfolio to suit their investment goals.”
Will Drevo, the Coinbase senior engineer said that he has done some early analysis of these tools. He notes that Coinbase’s top crypto accounts are usually inclined towards buying instead of selling their portfolio positions. In his blog post, Drevo wrote:
“Historically, when top holders are either unusually bullish or bearish this has been indicative of changing market conditions, but not always.”
However, Drevo warns that relying completely on signal-based strategy is not always beneficial or advisable. He asks crypto traders and investors to not blindly follow these tools and invest based on the signals. He instead asks them to use these signals to create their own crypto investment strategy. “If in doubt, consider consulting a financial professional,” he says.