A watchlist is a list with tickers of assets. A clean an comprehensive watchlist in and of itself can be valuable and help with making trading decisions. Let's talk about it in this post.
First things first, here's my current crypto watchlist: https://www.tradingview.com/watchlists/88905284/
In this list I've put all the most actively traded coins based on open interest and volume. This will of course need to be updated from time to time. I always include the price, the raw change and percentage change for the day (UTC time).
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You'll notice that everything's been categorised. There's a category for smart contract L1 blockchains, DEFI, metaverse coins, ... All the most popular concepts. This isn't just practical, it also makes it easier to spot which categories are getting bid because coins in the same category tend move in tandem. Of course the vast majority of the time the whole market simply follows bitcoin's and ethereum's footsteps, but there are exceptions.
Sometimes one or two specific projects have a big catalyst which makes them pump and then the hot ball of money that's rolling starts looking for the next "xyz" that's could pump. So, the market starts looking at similar coins. Sometimes it's an entire category that gets lifted because of something bigger that's happening. E.G. in October 2021 Facebook changed its name to Meta. At the same time there were some big funding rounds for metaverse projects too. Something was brewing and to no surprise "metaverse" coins started pumping. When such a trend kicks off, especially when this specific category is outperforming the rest of the market, it's best to not immediately fade it. Just follow the money and start with the blue chips. In this case the blue chips were SAND and MANA. Once they've had their run the money starts to trickle down to the more obscure coins.
It can also be useful to group coins based on the current "narrative". Crypto almost always moves based on narratives. The metaverse example I gave was a narrative. In July and August of 2022 the ethereum merge was a narrative. ETH was significantly outperforming BTC. Because of this other ETH related coins started pumping, piggy bagging on the success of ETH. LDO for example followed suit, then OP and METIS joined the party because those are ETH L2s so of course those coins profit from ETH's success. Eventually ETC took the spotlight because ETH miners had to go somewhere after ETH switched to proof of stake (POS) so that means that ETC suddenly had a narrative too. The desire to speculate is so great in most financial markets, especially in crypto, that eventually the narrative became questionable. But you could still see its effect ripple through the market. Once ETC started rallying BCH also had a very brief but strong pump. Why? ETC and BCH are similar in the sense that they're both unwanted bastard children (hard forks) of the OGs: ETH and BTC.
Once you get to this stage of the narrative the hot ball of money usually becomes lukewarm and will soon enough go cold. So when you start to think to yourself "is this even still part of the current narrative", it's probably time to wrap things up.
Another use for watchlists is to quickly asses whether the market is in risk-on or risk-off mode.
When it comes to crypto you can analyse this by looking at dominance charts.
- "dominance" refers to a coin's market cap relative to the global market cap i.e. "market share"-
Typically rising BTC and stablecoin dominance indicates a risk-off environment. However bitcoin dominance can also be on the rise because BTC is going on a solo rally.
Rising ETH dominance is usually bullish for altcoins. Similarly when the ETH/BTC market goes up it usually signals bullishness for altcoins.
On the chart above you can clearly see that USDT dominance generally has an inverse relationship with bitcoin's price.
I suggest that you regularly check these tickers (on Tradingview):
Looking at the market cap of these coins can also be helpful.
I also recommend taking a look at stablecoin prices now and then. Stablecoins exist for stability, naturally, so it's best that their prices continue to be pegged properly to their underlying FIAT currencies. If a big stablecoin starts depegging it could cause market wide turmoil like what we saw with terra (UST).
Here's a nice overview of all the most widely used stablecoins: https://www.coingecko.com/en/categories/stablecoins
That's it for this post.
Until next time!