Crypto Quant Models

[00:00:02.00] - Speaker 1
So we're going to start with the first model which is a regime sentiment indicator. So in the, in the volatile world of crypto, one of the one question that you know, everybody's asked is like, is now the time to be aggressive or defensive? So should I go all in in the crypto space or should I really get out and defend myself? Because the market is gonna crash. And we've seen that in, during COVID we've seen that during the tariff announcement a few months ago.

[00:00:32.00] - Speaker 1
And so it's very, very important that you understand the regime and the sentiment of the market. To help that with that, we have developed our risk on and off indicator, which is really a tool that basically looks at global risk appetite and offers a forward looking perspective on the crypto price behavior. So let's go into what the risk on and off indicator is. So the risk on and off indicator is a composite signal built using traditional financial market data. So the goal is look at macroeconomic instruments that are historically tied to shift in investor behavior and especially risk tolerance.

[00:01:14.07] - Speaker 1
So what we look at, we look at price action and, and intermarket relationships. And the indicator really is helping us define whether the market is in a risk on or risk off regime, which is also very, very important for crypto because they typically tend to react very fast to a sentiment or a gym change in the market.

[00:01:40.16] - Speaker 1
So by tracking momentum, volatility, cross asset flows, it helps you avoid fighting the tape and stay aligned with the broader market sentiment. So we can use this to basically adjust our risk, our position sizing and our trade ideas based on what the overall market is thinking.

[00:02:09.27] - Speaker 1
So unlike trend following or other, other indicators, this model offers a regime based signal. It's not about, you know, defining when to enter, when to exit, but is the goal is really to understand what's going on at the macro level and are we in a positive or negative sentiment for the crypto market?

[00:02:36.05] - Speaker 1
Why does this matter for crypto? Why do we need to look at macro and why do we, why, why is this important? Because cryptocurrencies like Bitcoin and Ethereum are very high beta and they are extremely high risk assets. So they behave more like early stage tech stocks than traditional currencies or commodities. So when global investors embrace risk, crypto tends to rally and when investors are selling, crypto usually drops really fast.

[00:03:06.24] - Speaker 1
Right. So understanding what's going on at the macro level is very, very important to understand the directional bias for the crypto market. So how can we read the signal? Right, so let's go into how to Use it. So here you have, at the top you have the chart of the crypto that you're looking for.

[00:03:28.01] - Speaker 1
So in this case we're looking at Bitcoin and at the bottom you have the indicator. So similar to a lot of the indicator that you guys use already, at the bottom of your chart here you have our indicator. Very, very simple. The indicator is really, we are in a risk on environment. If the indicator is greater than zero, this is a positive crypto bias.

[00:03:49.27] - Speaker 1
And if the indicator is lower than zero, we are in a risk off environment, which is of course negative for the crypto bias. So positive value indicates that the market participants are shifting capital into riskier assets. This is of course a green light for crypto bulls. A negative value means that there's more cautious in the market and crypto is likely to potentially face some volatility and some downturn as well. The signal works best when viewed in context.

[00:04:26.06] - Speaker 1
So it's not just don't just follow the indicator as it is, but look at market structure, look at our gamma models, look at our flow analytics and combine that with this indicator.

[00:04:44.21] - Speaker 1
Let's go into the second indicator and then we're going to go into the demo. The second indicator is called the qrsi. So this is an advanced version of the classic relative strength index, which, which is enhanced by, with machine learning and with our own methodology. And basically the goal of the QRSI is really to adapt to market regime. This is a mean reversion indicator.

[00:05:10.23] - Speaker 1
So the goal is really to filter out the noise and identifying more accurate overbought and oversold conditions. And it provides smarter reversal signals while maintaining the simplicity and clarity of the traditional rsi. So we use a similar approach of overbought and oversold conditions, but we adapt it by using our own proprietary model. So the, the indicator as, as I said, is a mean reversion indicator designed to improve on the standard RSI by integrated signals from multiple technical indicator. And basically, while the traditional RSI only relies on price momentum, price momentum over a fixed window, our QRSI really can help you bring more accuracy and reliability.

[00:05:59.20] - Speaker 1
And we're going to show you some backtesting results as well. So why, why is the traditional RSI not necessarily a good indicator to use? Or why like sometimes it basically provides wrong signals. The reason is very simple and we covered this in another webinar is really the concept of alpha decay. So every trader is using the same setup.

[00:06:28.25] - Speaker 1
They are using a 30 or 70 RSI to enter long or enter short position. And because everybody uses the same signals. These signals do not provide a statistical edge. So because everybody's using the same entry point and exit point, there is no hedge in that strategy. But of course as the market get faster and smarter, we need other tools that can help basically overcome this alpha decay and provide signals and an edge over the noise.

[00:07:00.20] - Speaker 1
So we've basically built the QRSI which is a new indicator that has a statistically significance because is also a multi factor evolution of the classic rsi. So we still can provide an edge by using this indicator.

[00:07:19.00] - Speaker 1
So what does the QRSI basically provide? So we are combining multiple signals coming from momentum, volatility and other models that we use. We apply statistical validation to confirm the strength and we try to reduce the noise from price whipsaws and low volume moves.

[00:07:42.26] - Speaker 1
How does it work? Again, very very similar to the RSI. It's normalized between 0 and 100. And basically the interpretation zones are very very similar. So above 90 we are in an overbought condition.

[00:07:59.25] - Speaker 1
Below 20 we are in an oversold condition. This zone suggests that a price move has become excessive relative to the historical norms and made you for a reversal or consolidation. However, unlike the traditional RSI which can remain extended for long periods and generate false positives, the QRSI uses a composite model to determine when these extreme are statistically valid.

[00:08:31.16] - Speaker 1
Just like obviously the original and traditional rsi, the QRSI is not a magic bullet. Right. The model cannot predict the future. Right. So we always need to use it in conjunction with our price structure confirmation like support and resistance zone volume option data, gamma models and more.

[00:08:59.27] - Speaker 1
Now let's go to our third indicator which is our Q crypto direction. So this is a forward looking signal that predicts short to medium term market direction. So we're using advanced technical data, trend modeling and volatility measures. And these indicators can provide a bullish or bearish bias to guide you through your trading decision. So it's good for identifying trend shifts and confirming your setups.

[00:09:28.16] - Speaker 1
It's a directional bias indicator, so you can use it in conjunction with the other two indicators to understand the if the crypto market can be in a trending in a trend, or maybe we are looking at some reversal opportunities.

[00:09:45.07] - Speaker 1
So unlike trend indicators that follow price or oscillators that fluctuate with short term volatility, the direction indicator combines multiple technical market indicators into a simplified output score that goes from minus one to two. And let's go into the details of the score. So we have a minus one score which is a very bearish bias we have a zero score, which is a neutral bias, and then we have one and two, which are strong and bullish bias.

[00:10:20.29] - Speaker 1
And basically, we've really made it simple. It's just really a number that reflects the collective strength or weakness in the crypto space. The score moves in all numbers only, so there's no decimals, so there's no ambiguity, so you can only have a minus 1, 0, a 1 and a 2.

[00:10:40.27] - Speaker 1
It's worth to understand that this is not a trading recommendation. It does not include any stop loss, take profit targets. So it's just really another indicator that you can use to formulate your theory, your strategy that can help you support your ideas. And basically, it can be used in conjunction with our qrsi, our gamma model, our option flow that we're going to show you in a second.