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Crypto Returns Principal Components

first posted: 2021-11-03 17:03:40.970699

Summary

We make the following points in this article:

  • volatility of alts is much higher than "low volatility" coins such as BTC or ETF
  • we use PCA analysis on market move correlation
  • BTC has a slightly higher weight in PCA1 than ETH, which means it leads the market
  • crypto price moves in USD show a principal market move is general move against USD and secondary move which is more shitcoin specific (shitcoin is any coin with lower market cap, independently of its merit).
  • crypto price moves in BTC shows a principal market move with main altcoin, and a secondary move with opposite weights between shitcoin and altcoin

There are additional findings for a BTC numeraire alt/shitcoin speculator:

  • ETH, BNB, XRP are in PCA1 in expressed in BTC
  • XMR and DASH is moving opposite to ETH and BNB in pca2
  • DOGE and SOL are not part of PCA1, but they are the same direction as ETH BNB XRP in PCA2
  • LTC is part of PCA1 but not part of PCA2

You can find a regularly updated Altcoin Price Action Gallery here.

Joint Returns

We take a look at minute log return of top market cap crypto in USD since May 2021. Altcoins are in general much more volatility than Bitcoin.

For example, as of November 2021, We see token such as Arweave show much volatility compared to the usual suspects:

img

To avoid overwhelming the analysis with high variance coin, we will do our PCA analysis on correlation, not covariance, and report volatility separately.

Eigenvalue based Definition of Major Coin

In the following, graphs with dates under the title are updated regularly, whereas those without date were generated in November 2021. The first eigenvalue of the move corresponds to the general cryptomarket. The next eigenvalues are much smaller: img

The first PCA vector is a general market move, the next one differentiates between top 10 crypto and the ones below:

img

Here are volatility reweighted normalised weights:

img

with BTC Numeraire

While it appears from a USD numeraire point of view that much of the cryptoworld is revolving around BTC, The altcoin situation seen in a BTC-centric universe is also volatile.

img

The first PCA vector is a general market move, the next one differentiates between top 10 crypto and the ones below:

img

Here are volatility reweighted normalised weights:

img

Table for USD Numeraire

The table below show the eigenvalues and annualized 1min bar vol using USD as numeraire in Nov 2021. You can check out in this link the pca weights for the USD regression
name pca1weight pca2weight sd
0 BTCBUSD 0.086477 -0.000000 0.540178
1 ETHBUSD 0.075640 -0.000000 0.632484
2 BNBBUSD 0.076944 -0.000000 0.641083
3 ADABUSD 0.058080 -0.000000 0.757182
4 SOLBUSD 0.000000 -0.000000 1.239860
5 XRPBUSD 0.049643 -0.000000 0.873370
6 DOTBUSD 0.000000 -0.000000 1.276862
7 DOGEBUSD 0.000000 -0.000000 1.316120
8 LUNABUSD 0.032194 -0.000000 1.076197
9 AVAXBUSD 0.000000 -0.000000 1.061668
10 LTCBUSD 0.056199 -0.000000 0.786281
11 MATICBUSD 0.000000 -0.000000 1.226094
12 ALGOBUSD 0.041322 -0.000000 0.923163
13 BCHBUSD 0.062968 0.031669 0.644263
14 XLMBUSD 0.046168 0.000000 0.870582
15 VETBUSD 0.044520 -0.000000 0.970129
16 ICPBUSD 0.000000 -0.000000 1.338157
17 ATOMBUSD 0.032720 -0.000000 1.106935
18 TRXBUSD 0.050860 -0.000000 0.808871
19 FILBUSD 0.000000 0.000000 1.171494
20 THETABUSD 0.000000 0.000000 1.320701
21 ETCBUSD 0.047044 0.021466 0.940489
22 FTMBUSD 0.000000 -0.000000 1.304413
23 HBARBUSD 0.000000 0.000000 1.209527
24 NEARBUSD 0.000000 0.000000 1.455388
25 EGLDBUSD 0.033556 -0.000000 0.991676
26 XTZBUSD 0.044321 0.000000 0.905309
27 XMRBUSD 0.037348 0.101504 0.750380
28 EOSBUSD 0.048822 0.000000 0.928188
29 FLOWBUSD 0.000000 0.044328 0.994600
30 KLAYBUSD 0.000000 0.000000 1.285194
31 KSMBUSD 0.000000 0.029323 1.107920
32 XECBUSD 0.000000 0.069611 0.876459
33 ONEBUSD 0.000000 -0.000000 1.470776
34 NEOBUSD 0.000000 0.068228 1.065595
35 WAVESBUSD 0.032825 0.109853 0.736906
36 ARBUSD 0.000000 -0.000000 3.285408
37 HNTBUSD 0.000000 0.077162 1.010179
38 STXBUSD 0.000000 0.000000 1.616484
39 CELOBUSD 0.000000 0.049310 1.266302
40 ZECBUSD 0.000000 0.028923 1.162800
41 DASHBUSD 0.042350 0.082799 0.849767
42 XEMBUSD 0.000000 0.032057 1.719301
43 QTUMBUSD 0.000000 0.000000 2.441470
44 ICXBUSD 0.000000 0.041656 1.410561
45 SCRTBUSD 0.000000 0.000000 1.697214
46 RVNBUSD 0.000000 0.000000 2.018899
47 ZILBUSD 0.000000 0.000000 1.438581
48 MINABUSD 0.000000 0.000000 1.204332
49 BTGBUSD 0.000000 0.038279 1.045559
50 SRMBUSD 0.000000 -0.000000 1.290695
51 SCBUSD 0.000000 0.000000 2.231850
52 ZENBUSD 0.000000 0.026595 1.829262
53 IOSTBUSD 0.000000 0.035490 1.315245
54 ONTBUSD 0.000000 0.046571 1.447988
55 DGBBUSD 0.000000 0.000000 2.719589
56 NANOBUSD 0.000000 0.033385 1.261482
57 IOTXBUSD 0.000000 0.031793 1.952967

Table for BTC Numeraire

The table below shows the eigenvalues and annualized 1min bar vol using BTC as numeraire. The USD numeraire vol is shown for reference in Nov 2021. You can check out in this links the pca weights for the BTC regression.
name pca1weight pca2weight vol usd vol btc
0 ETHBUSD 0.080281 -0.442356 0.631074 0.399763
1 BNBBUSD 0.089592 -0.218200 0.639608 0.506387
2 ADABUSD 0.064518 -0.000000 0.756287 0.678334
3 SOLBUSD 0.000000 -0.229079 1.238086 1.089268
4 XRPBUSD 0.050650 -0.198888 0.874854 0.746793
5 DOTBUSD 0.000000 -0.227549 1.279820 1.165198
6 DOGEBUSD 0.000000 -0.176165 1.307023 1.194005
7 LUNABUSD 0.031217 -0.000000 1.074485 0.997888
8 AVAXBUSD 0.000000 -0.000000 1.082602 1.021043
9 LTCBUSD 0.059975 -0.000000 0.784719 0.674549
10 MATICBUSD 0.000000 -0.237138 1.225346 1.088406
11 ALGOBUSD 0.042069 -0.000000 0.928349 0.852441
12 BCHBUSD 0.065483 0.319038 0.645938 0.614977
13 XLMBUSD 0.050170 0.000000 0.866881 0.799164
14 VETBUSD 0.043613 -0.189233 0.967426 0.823489
15 ICPBUSD 0.000000 -0.164076 1.331588 1.178903
16 ATOMBUSD 0.032282 -0.000000 1.112349 1.030491
17 TRXBUSD 0.053278 0.000000 0.810862 0.737790
18 FILBUSD 0.000000 -0.000000 1.166234 1.088717
19 THETABUSD 0.000000 -0.000000 1.315792 1.189692
20 ETCBUSD 0.051281 -0.000000 0.935717 0.823364
21 FTMBUSD 0.000000 -0.000000 1.298556 1.201003
22 HBARBUSD 0.000000 0.000000 1.203978 1.128970
23 NEARBUSD 0.000000 -0.000000 1.465322 1.379422
24 EGLDBUSD 0.029556 0.000000 1.021164 0.959481
25 XTZBUSD 0.046843 0.000000 0.911909 0.839018
26 XMRBUSD 0.040122 0.400218 0.746856 0.779006
27 EOSBUSD 0.054537 -0.000000 0.925389 0.814823
28 FLOWBUSD 0.000000 0.274074 0.991807 1.030050
29 KLAYBUSD 0.000000 0.000000 1.289035 1.274477
30 KSMBUSD 0.000000 0.000000 1.106096 1.091876
31 XECBUSD 0.000000 0.342811 0.873153 0.904795
32 ONEBUSD 0.000000 -0.000000 1.465385 1.382834
33 NEOBUSD 0.031414 0.148038 1.060670 1.026766
34 WAVESBUSD 0.037525 0.429267 0.734760 0.799871
35 ARBUSD 0.000000 -0.000000 3.276077 3.174869
36 HNTBUSD 0.000000 0.265624 1.014093 1.035390
37 STXBUSD 0.000000 0.000000 1.606570 1.603609
38 CELOBUSD 0.000000 0.190112 1.286502 1.304472
39 ZECBUSD 0.000000 0.000000 1.159537 1.096045
40 DASHBUSD 0.045595 0.247572 0.847228 0.814552
41 XEMBUSD 0.000000 0.000000 1.710342 1.671244
42 QTUMBUSD 0.000000 -0.000000 2.424313 2.399108
43 ICXBUSD 0.000000 0.000000 1.407096 1.373157
44 SCRTBUSD 0.000000 0.000000 1.690813 1.676038
45 RVNBUSD 0.000000 0.000000 2.028748 1.971022
46 ZILBUSD 0.000000 -0.000000 1.430711 1.370635
47 MINABUSD 0.000000 0.000000 1.204259 1.164102
48 BTGBUSD 0.000000 0.297411 1.053368 1.128251
49 SRMBUSD 0.000000 -0.000000 1.291368 1.178042
50 SCBUSD 0.000000 -0.000000 2.218350 2.148527
51 ZENBUSD 0.000000 0.000000 1.819636 1.750716
52 IOSTBUSD 0.000000 0.000000 1.319675 1.297015
53 ONTBUSD 0.000000 0.000000 1.439334 1.410289
54 DGBBUSD 0.000000 -0.000000 2.700194 2.657612
55 NANOBUSD 0.000000 0.168519 1.256257 1.256987
56 IOTXBUSD 0.000000 0.000000 2.402692 2.385164