Editor's Note: The original title was "Several Data to Help Us Predict Extreme Quotes"
1. Extreme market conditions, accompanied by extreme signals
Before entering the text, let's talk about other things first.
In investment, many people are accustomed to responding to the cyclical changes in investment throughout the year. The weather always has hot and cold winters, corresponding to the ups and downs in investment, and there is a famous "Merrill Clock" in investment science, which has a similar meaning.
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If we can find the hottest point and the coldest point of the year, then we basically have a general direction of the weather throughout the year: once the hottest time is reached, then the next weather will only be It is getting colder and colder; once the coldest time is reached, then the weather will only get hotter and hotter.
Similarly, if we can find the point where the market is at its peak and the point where the market is at its lowest when investing, then we basically smooth the cycle: when the market reaches its peak, the next step is only possible It is getting lower and lower; when the market price reaches the lowest point, it will only become more and more greedy. So, the question becomes how to find the most fearful and greedy point in the market.
Fortunately, the most extreme cases generally do n’t appear suddenly. In fact, many signals have appeared before the extreme cases. That is to say, the extreme cases must be accompanied by extreme signals . There will be a certain prediction.
Let ’s return to the analogy of weather. Without a calendar and without a thermometer, how can we find the hottest and coldest points of the year?
It's hard! Basically not found!
However, we can be flexible. Although we can't find the hottest and coldest points of the year, we can roughly estimate that the hottest and coldest weather has arrived through two natural phenomena. The phenomena are: heat stroke and snow.
Although it is not always necessary to have heatstroke around you every summer, there are people who usually start to have heatstroke, which basically means that the year is the hottest;
Although it doesn't necessarily snow every winter, when it starts to snow, it basically means that the year is the coldest.
Some people have heat strokes as appearances, and extreme heat as essence; snowing as appearances, and cold winter as essences; essence is important, but difficult to grasp, but appearances can give us a clear signal. If we can find a signal like "someone has a heat stroke" or "starting to snow" in our investment, we can basically speculate on the "temperature" of the market and the cycle, so as to grasp the basic trajectory of the cycle and trend change.
2. Several important signals of the digital currency market
Well, with so much foreshadowing, we return to the topic. For example, from the extreme market situation on March 12, 2020, in fact, before this market appeared, there have been many abnormal data in the market, some data even Is very rare.
Some institutions have made some preparations accordingly, bought some put options, or closed multiple orders in time, thus avoiding a disaster; some people have not escaped this disaster, and suffered heavy losses, and even kept making up positions. Explosion, no return.
I do n’t think that these data appear accidentally, I believe that these abnormal data will appear again and again in the future, so we must think about all the information that appears in this plunge, and treat where we made mistakes. Reflect, maybe this will happen next time, we will deal with it better.
1. USDT cannot be borrowed in the market
About three days to a week before this plunge, a friend in one of my communities asked: "What is the problem with the system, or is the USDT borrowed? Why is it that I just have a few times each time Failed to borrow USDT? ". Then someone replied to him: "There must be a problem with the system. How could the USDT be borrowed?". After a while, another person replied: "It should be that the USDT has been borrowed, and the system is fine."
This conversation did not attract my attention at the time, but when I reflect on it afterwards, "USDT cannot be borrowed in the market" and "USDT has been borrowed." This is a very important signal. The exchange's USDT is very sufficient, and there will be basically no situation of not being able to borrow USDT, and generally the interest on borrowing USDT is not too high, about five ten thousandths, one thousandth when it is higher, regardless of the high interest rate It's still low, and I can always borrow it.
When the market cannot borrow USDT at all, it shows that market sentiment has become very popular, indicating that the market has borrowed a lot of USDT, either for leverage, or for arbitrage or other directions, no matter where it is used, USDT After being borrowed, it shows that a large amount of funds in the market have entered the market, and it also shows that the market is short of funds. The short-term market is determined by whether the funds are sufficient in the later period, so in this case Next, it is easy to change.
This kind of signal does not appear only once, and has appeared before, but this kind of signal will never appear every day. Once it appears, it basically means that the current market situation is hot and the next major market turning point may need to be taken seriously.
2. Ratio of long and short positions
We all know that one of the most important reasons for such extreme market conditions as September 25, 2019 and March 12, 2020 is the continuous burst of leverage caused by the plunge, which means that high leverage plays a very important role in it. The role.
There is a data called [the ratio of long and short positions], this data is also very worthy of attention. Literally, it represents the ratio of the number of people holding long positions to the number of people holding short positions. Under normal circumstances, these two numbers are close to 1, close to 1 indicates that some people in the market are bullish, some are bearish, and the market divergence is relatively large, so this should be the normal market situation.
However, once this number exceeds 2, or even exceeds 3, it means that there are far more long-selling people than short-selling people, and those holding long-position leverage far exceed those holding short-position leverage. situation. Moreover, this situation is generally accompanied by a long-term rise in the early period of the market, which makes the market bullish and strong, forming a one-sided situation, but this is also the case, the market is easy to reverse.
For example, the data [the ratio of long and short positions] displayed by an exchange today is around 1.17, which is a normal position. But before March 12, 2020, this number reached 2.7, which is a very high number.
3. Inter-agency borrowing rate
If the first two data reflect the behavior of retail investors more, then the inter-agency borrowing rate reflects the behavior of large institutions.
The so-called inter-institutional lending rate refers to the short-term lending behavior between large trading platforms, which is somewhat similar to the mutual lending between traditional financial institutions. If the lending rate suddenly increases sharply, it means that the demand for USDT among institutions has suddenly increased, and at the same time, it also reflects that the market is adding a lot of leverage.
For example, in January and February 2020, the inter-agency lending rate was about 5% -7% annualized rate, but around 3.12, the interest rate soared to about 15% -18%, which has increased several times. Then the market suddenly reversed and extreme market conditions occurred.
The principle is also very simple, large exchanges themselves will have sufficient USDT reserves, but when their reserves can no longer meet the market supply, when they need to go to external borrowing, and borrowing at such a high interest rate, it means that the market is currently The funds have been fully invested and leveraged, and the subsequent funds are seriously insufficient.
In addition to the three data mentioned above, there are many useful data, such as futures spot premium, such as over-the-counter USDT premium, such as the cumulative increase from the lowest point, such as the cumulative increase in the last 60 days, such as the exchange The 24-hour net sales volume, these data are very useful signals. If you combine them or make a model to see it together, the effect is better. Interested friends can study it by themselves. I will not do it here. Explained one by one.
These data may not be as intuitive as "heat stroke" or "snow", and it may be difficult to say whether the next time they encounter these signals, it must mean that the market trend is about to reverse.
However, the observation of these data is very important. It is better to be prepared than to be unprepared to "travel the arsenal with torches", and the more these signals appear at the same time, the stronger the predictive effect.
We usually accumulate these data and establish a good observation and risk control model. When a large amount of abnormal data appears, we should take more risk countermeasures, which may be much better than the "streaking" that we rely on intuitive investment.