Hi friends-
A few days ago, before the sell-off, I posted an update of the StratVal analysis I use in my efforts to avoid buying in overheated markets. I've used this for years on a variety of asset classes with good success. A big thank you to those that read that post and I hope it helped.
I wanted to use this post to help calibrate readers a bit further on this powerful tool and also give some historical context for the sell-off in ETH we saw in the last 24 hours.
Below is an updated chart of the StratVal applied to ETH. This time I'm zooming in so you can see more clearly where we are. On a 50 day look back, we are still quite extended. You can see from the original post that it can bounce around extended levels for a while though. As previously stated, I use this to figure out when the engine is overheating so that I can pull over and let things cool of (stop buying for a while).
So how about the move we just experienced? The data pull I use from Google sheets shows the close to close return for ETH today was -12.52%. Yes- I understand the crypto markets don't close but I'm simply reporting the daily data as gleaned from Google sheets. I built a histogram (below) to get a sense of the magnitude of the daily loss we just went through relative history.
Looking back roughly 5 years, a single day return of -12.52% is among the worst 1.2% of observations we have experienced. Said another way, 98.8% of the time, we have enjoyed daily returns greater than what we just experienced. In summary, today was truly a historically bad day relative to the last 5 years.
In closing, I'm still a huge fan and think the future is bright. With all the pump articles that that I read and get excited about though, I need something like this type of analysis helps keep me grounded. It's my way of applying one of the lessons I posted about here.
As always, this is not investment advice and please do your own research!
Cheers,
NZFX
