Blockchain Quantitative Investing Series Courses ((2) - Understanding the digital currency

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NO.1

Bitcoin is the first example of blockchain technology, and with its price spiking in 2017, there is a continuous warming of blockchain technology. Various blockchain flagship coins, such as shadow coins, air coins, and exchange coins, have emerged in a short time.

NO.2

What is a shanty coin?

Strictly speaking, in addition to Bitcoin, other subsequent implementations of blockchain technology are called "cryptocurrencies". In foreign countries, they are known as "competitive cryptocurrencies". According to statistics, about 99% of the cryptocurrencies on the market are modified or even directly applied to the Bitcoin source code, and then ordered to rename a new name, a new currency is born.

However, not all of the Ethereum coins are worthless, for example, Ethereum has made many improvements based on Bitcoin's shortcomings, and using smart contracts to replace Bitcoin's hash function is a huge innovation.

What is the Air Currency?

The biggest difference between the two is that the project's starting point, the concept is very bullish, up can be the blue sky next month, down can be the green sea, but if you think about it, there is no chance of landing at all. Their only purpose is not the project, but to slice the money.

What is a coin exchange?

The biggest feature is that there is no connection to the blockchain, no code can be found on Github, even the most basic wallet is not there, is a concept of a "push", with high returns as an interface, pulling people's heads to develop offline.

The speed and quantity of the coins are manipulated by the company or platform, as long as the platform developer wants to, some can even be multiplied indefinitely.

No.3

How to avoid investing in these junk coins

Like tulips back then, it is difficult to measure the true value of these digital currencies today, and even if they are the leading bitcoin in the digital currency, there is no way to know how much they are really worth, so the risk is relative.

However, it is not impossible to filter out these junk coins, and the best approach is to make a comprehensive assessment of the market value, transaction volume, price, etc. of different digital currencies based on market activity.

Market activity: BTC's 24-hour trading volume, which peaked in the fourth quarter of the 17th year at a peak of nearly $220 million per day, is currently around $20 million.

NO.4

Exchange risk

In addition to the risks of digital currencies themselves, there is also the risk of exchanges. Almost all exchanges can experience problems, be it theft, suspension of services, reversal of transactions, vigilantism, runways, etc.In addition, the API of the exchange also has a variety of data errors, delays, lack of conventional norms that lead to access costs that are too high, which is not comparable to traditional financial secondary market exchanges.

NO.5

Features of digital currency trading

• The digital currency is open for trading 24 hours a day, which makes it rare to see a jump gap in non-extreme markets.
• Cryptocurrency trading is free of caps and stock futures are capped by caps, for example: Bitcoin surged more than 20% in a single day on May 28, 2017, which gives the market a strong self-correction capacity.
• A minimum of 0.0001 BTC can be purchased by a digital currency exchange unit, and the entry threshold is low.
• Cryptocurrency T+0 Anytime buy and sell transaction. Stocks are T+1 transactions, i.e. shares are bought on the same day and can be sold on the next trading day.

Types of orders for digital currency:

• Limit-Price Trading: An investor can set a buy price below the market price, or a sell price above the market price, when the market price fluctuates to its set price, i.e. a transaction. When the set price and the market price deviate from the market price, it is easy to see the result of not being able to do the transaction.
• Market price trading: Trading at the current market price can to some extent guarantee the timely execution of the investor's buy and sell orders, but at the same time, the market price is not predictable for the investor who has previously ordered the market price.
• The basic principles of the transaction are: price priority, time priority. Higher purchase price is better than lower purchase price, lower selling price is better than higher selling price, when the price of the order is the same, orders with earlier ordering time are better than orders with later ordering time.

NO.6

Creating the first digital currency quantification strategy

This article looks at the inventors' implementation of a quantitative trading platform through a one-size-fits-all strategy, to familiarize themselves with the platform and quickly get into it and create their own quantitative strategy. Difficulty: entry level

Strategic logic

• The exchange is traded on Litecoin.
• Trading cycle: 1H
• Purchase condition: If the current account has no Litecoin and the price is higher than the short-term average, and the price is higher than the long-term average, and the short-term average is higher than the long-term average, and the short-term average is higher, and the long-term average is higher.
• Conditions of sale: If the current account holds Litecoin and the price is below the long-term average. This is a broad-based and asymmetrical trending strategy, so how do we do it in practice?Inventor quantified (www.fmz.cn)

You will find that we can easily combine the two; the whole strategy only takes three steps: 1. Pre-processing of the transaction. 2. Obtain and compute data. 3. Follow the order.

1 Transaction pre-processing

Inventor quantified (www.fmz.cn)

2, Obtaining and computing data

Inventor quantified (www.fmz.cn)

3, the following operation

Inventor quantified (www.fmz.cn)

NO.7

So, we built a strategy in just 50 lines of code, and the final full code is:Inventor quantified (www.fmz.cn)

So what do we do next? Let's do a historical review of our strategy and see how it performs historically.

Inventor quantified (www.fmz.cn)

On the simulation review page, select from January 4, 2015 to October 4, 2016 to review with $100,000 and click to start the review. If the code is OK, in a few seconds we will get the historical performance of the strategy:

Inventor quantified (www.fmz.cn)

We can see the necessary risk-reward indicators, performance details, and more in the feedback details to help you understand the performance of the strategy. Here, a complete process from building the strategy idea to writing the strategy code to checking the feedback results is over. The first half of 2018 was definitely a disaster for the digital currency, and in just six months, the price of Litecoin has fallen by almost 70%, and this simple simple strategy not only helps you avoid the sharp price decline that led to the shrinkage of the asset, but also allows you to try something small, etc.

Read more:Blockchain Quantitative Investing series of courses ((1) - briefing Blockchain Quantitative Investing Series Course ((3)) - cross-term leverage Blockchain Quantitative Investing series of courses ((4) - Dynamic balancing strategies