Methodology Thesis

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Methodology

Below you can find a description of the key points of analysis that can be found on our mobile application and shared on twitter via the BlockSmith Bot. These definitions and formulas are the results of our ongoing efforts to provide systematic clarity to the crypto asset marketplace.

Our content must be used for informational purposes only. It is very important to do your own analysis before making any investment. You should take independent financial advice from a professional, or independently research and verify any information that you find on our Website or Mobile App and wish to rely upon, whether for the purpose of making an investment decision or otherwise.

Momentum

The BlockSmith Momentum Indicator is designed to measure the long term technical strength of the price of a crypto-asset. The higher the score the better the relative long term performance of the asset. BlockSmith Momentum can be used to compare and select assets and has the potential to be particularly useful for informing longer-term strategic positions.

Trend

The BlockSmith Trend Indicator is designed to assess the recent short term performance of the price of a crypto-asset. The higher the score the better the recent relative strength of the asset. BlockSmith Trend can be used to inform shorter-term trading positions and in conjunction with BlockSmith Momentum for a more comprehensive allocation strategy.

Risk

The BlockSmith Risk Indicator provides a measure of the historical price volatility of a crypto-asset. The lower the score the lower the past volatility of the asset. This is a relative measure, a low score means that the risk has historically been lower than other crypto-assets. We also analyse Sharpe Ratios to better inform decisions about trade size or portfolio allocation. For example, a trader may favour smaller positions in the most volatile assets with the lowest BlockSmith Risk score.

Correlation

The BlockSmith Correlation Score provides a comparison between the prices of two crypto-assets. The score ranges from -1 to 1. The higher the score, the more alike are the price movements of the two given assets over the timeframe. A positive score implies that the two assets move together. A score of 0 implies there is no correlation between the price movement of the two assets. A negative score implies that the two assets move in opposite directions. The BlockSmith Correlation Score is useful in constructing a hedged portfolio.

Sentiment

The BlockSmith Sentiment Score is a composite measure designed to assess the sentiment of activity and discussion concerning the asset in question. The score comprises elements across Social, News, Technical and Fundamental analysis. The higher the score the more positive the discussion of the assets across platforms, and the larger the volume of that discussion. The lower the score the more negative and sparse is the discussion of the given crypto-asset.

Risk XY Plot

The BlockSmith Risk XY Plot gives a comparative depiction of the BlockSmith Risk Indicator, plotted against the BlockSmith Momentum Indicator. Each crypto-asset is positioned in the XY region in a position relative to the other crypto-assets in the set of the top 30 market cap. The origin of the XY plot is the mean average of both axes, the upper right quadrant is where both Risk and Momentum are above the average for the set, while the lower left quadrant is where both Risk and Momentum are below the average for the set. This is a useful tool to rank assets by Risk/Return potential.

Onchain Analytics

We also perform much onchain analysis of individual crypto-assets. We use this as a key element in our fundamental analysis of each asset and to inform our ongoing portfolio allocation. We are looking forward to releasing more of this analysis to our customers soon.

Stablecoins

In analysing the top coins by market cap, we pay attention to several stablecoins. In our relative rankings, the position of stablecoins can represent key pivot points in the market. This image shows the top ranked crypto-assets by BlockSmith Score (an average taken over our Momentum, Trend, Risk and Sentiment scores). The position of USDT Tether may suggest to an investor to consider increasing buy positions in assets ranked above USDT; and vice-versa to consider increasing sell positions in assets ranked below USDT.

Trend

The BlockSmith Trend Indicator is designed to assess the recent short term performance of the price of a crypto-asset. The higher the score the better the recent relative strength of the asset. BlockSmith Trend can be used to inform shorter-term trading positions and in conjunction with BlockSmith Momentum for a more comprehensive allocation strategy.

Correlation

The BlockSmith Correlation Score provides a comparison between the prices of two crypto-assets. The score ranges from -1 to 1. The higher the score, the more alike are the price movements of the two given assets over the timeframe. A positive score implies that the two assets move together. A score of 0 implies there is no correlation between the price movement of the two assets. A negative score implies that the two assets move in opposite directions. The BlockSmith Correlation Score is useful in constructing a hedged portfolio.

Risk XY Plot

The BlockSmith Risk XY Plot gives a comparative depiction of the BlockSmith Risk Indicator, plotted against the BlockSmith Momentum Indicator. Each crypto-asset is positioned in the XY region in a position relative to the other crypto-assets in the set of the top 30 market cap. The origin of the XY plot is the mean average of both axes, the upper right quadrant is where both Risk and Momentum are above the average for the set, while the lower left quadrant is where both Risk and Momentum are below the average for the set. This is a useful tool to rank assets by Risk/Return potential.

Stablecoins

In analysing the top coins by market cap, we pay attention to several stablecoins. In our relative rankings, the position of stablecoins can represent key pivot points in the market. This image shows the top ranked crypto-assets by BlockSmith Score (an average taken over our Momentum, Trend, Risk and Sentiment scores). The position of USDT Tether may suggest to an investor to consider increasing buy positions in assets ranked above USDT; and vice-versa to consider increasing sell positions in assets ranked below USDT.