You can find cryptocurrencies poised for growth when the markets begin to turn.
You’d just have to search for cryptos priced in U.S. dollars (USD), and the “big three” cryptos: Bitcoin (BTC), Ethereum (ETH), and Litecoin (LTC).
And you can track more than just the cryptos’ price; you’re also able to track the Volatility Quotient (VQ) and Crypto State Indicators (CSI) of the more than 1,000 cryptos we are currently following.
Our research shows it’s that ability to compare the various risk characteristics using the four base currencies that creates an opportunity we can take advantage of when the crypto markets begin to turn substantially higher.
We studied thousands of trades at different entry points and found the key to this potential outperformance is to compare the cryptos’ VQ in both dollar-based terms and bitcoin-based terms. We want to find situations where the VQ as measured in USD is lower or only slightly higher than the VQ as measured in BTC.
We’ve showed you the power of comparing the CSI of various cryptos using this pairing method. Now, we’re adding the idea that when the VQs are similar in both USD and BTC — the closer the better — it’s an additional sign of strength.
But this situation is difficult to find.
BTC has a high-risk VQ of 30.7% and the USD has a low-risk VQ of only 5.4%. Because of this disparity, it is normal for a cryptocurrency to have a higher USD VQ% and a lower BTC VQ%. When the VQ of a coin is similar in both USD and BTC terms, it has the possibility to substantially outperform BTC.
Here’s an example.
At the beginning of 2017, NEO (NEO) had a BTC VQ of 48.71%. Its USD VQ was only slightly higher at 49.10%. When the market was bullish, NEO moved higher by almost 15,000% while BTC moved up “only” 303%.
Here’s a close-up of that dramatic outperformance over the first 9 months of 2017.
During the bear market, the VQ has increased for NEO in both BTC and USD. The current BTC VQ for NEO is 53.93% and for NEO/USD it is slightly higher at 56.61%. That 5% difference in volatility is within a range we consider acceptable when comparing the VQs on a USD and BTC basis. NEO will be one of the coins to watch when the bull market resumes.
A second example is LTC. LTC jumped more than 1,000% in the first nine months of 2017. At the beginning of 2017, the LTC’s VQ in BTC was only 19.38%. Its USD VQ was actually a little more than 10% lower at 17.27%.
Here’s the same close-up that shows the LTC outperformance against BTC over the first 9 months of 2017.
The current VQ for LTC is higher in both BTC and USD terms. Its BTC VQ is 35.04% and the USD VQ is 39.16%. The USD-based VQ is almost 12% higher than the BTC-based VQ. At this point in time, we’re less bullish on the potential of LTC until the USD-based VQ moves closer to the BTC-based VQ.
Both of these coins are extremely liquid. LTC has the seventh-highest market cap and NEO is No. 15 in market cap among all cryptocurrencies. This liquidity means that NEO and LTC — and other more-liquid cryptos — usually have lower volatility when priced in fiat currency than other less-liquid crypto currencies. Because of this lower volatility, these coins are able to move higher and stay in strong uptrends for a longer period of time.