Crypto Academy / Season 3 / Week 5 - Homework Post for Professor [@imagen] : Market Patterns and Blockchain Projects

aneukpineung78 (70)in SteemitCryptoAcademy • 3 years ago (edited)

This is my homework post for Steemit Crypto Academy Season 3 Week 5 for Professor @imagen’s lesson Market Patterns and Blockchain Projects.

1.) Investing on A Cryptocurrency.

For this task I chose Cardano (ADA).

^{Cardano (ADA) logo as seen on https://cardano.org/.}

1.a. Making An Investment Of $12 Or More

My native fiat currency is IDR. The USD/IDR rate at the time I did this task was around 14,450.- as shown in the picture below. For USD12, it was equivalent to around IDR174,000.-. I will make this investment via my UPbit account.

I opened UPbit website. I clicked the [Log In] button on the menu on the upper right corner of the page.
Filled in my credentials, and hit the [Log In] button.
Since I set my UPbit account with 2FA from Google Authenticator, I was asked to enter it.
I was logged in. I search for ADA by typing on the search box on the right panel of the page (marked number (1) on the image below). At the lower part is the results box, I clicked on ADA (marked number (2)).
Now the UPbit showed the ADA/IDR page. The price was IDR18,950.-.
I placed a buy order for 10 ADA at the limit price of IDR19,000.-. It would cost me IDR190,000.-. That has exceeded the minimum amount of investment required for the task. When I was done, I clicked the [Buy] button.
On the confirmation pop-up box, I proceeded by clicking the [Buy Confirm] button.
The buy order was successful.
I checked the order note, the transaction was completed.
The picture below shows the recent history of my trade.

1.b. Why I Choose Cardano (ADA)

Among the reasons why I chose Cardano (ADA) are:

The Cardano blockchain was founded by people who highly experienced in the world of blockchain and cryptocurrency, and are also supported by a solid and experienced team in these technologies. Cardano founder, Charles Hoskinson was a co-founder of Ethereum blockchain.
Cardano (ADA) ranks 5th in the order of cryptocurrency market capitalization.
^{Screenshot from coingecko.com.}
Cardano blockchain is energy-efficient. In other words: it is eco-friendly crypto. Bitcoin uses an estimated 130 terawatt hours energy per year, and Ethereum uses 50 terawatt hours, while Cardano only needs 6 gigawatt hours per year.
I am also interested because their technology implementation for a better world, for example, IOHK as the company that founded the Cardano project (ADA) announced a collaboration with the Ethiopian government in 2018, to transfer its technology to various industries in the country. In April 2021, the latest collaboration took place between IOHK and the Ethiopian government through the Ethiopian Ministry of Education, in which both parties announced plans to apply Cardano technology in identity and data recording and recording systems to about five million students in the country.
And, because ADA is available in my native fiat currency in the exchange of my choice, UPbit. I prefer the IDR pair of cryptocurrency better than another pair.

1.c. Cardano (ADA) Market Capitalization

According to information on coingecko.com, at the time I was doing this homework post, the market capitalization of ADA was at $40,614,473,915.

The Circulating Supply (the total amount of the coins that are circulating in the market and are available to trade by public) was at 32,066,390,668 ADA. The Total Supply of Cardano is 45,000,000,000. The Maximum Supply was set at 45,000,000,000, so the total supply of Cardano has reached its maximum supply.

1.d. Cardano (ADA) Position In The Cryptoasset Rankings

At the time I was doing this, according to coingecko.com, Cardano (ADA) ranks at number 5 of the highest market capitalization, with the Market Capitalization Dominance at 2.56%. Cardano is now traded at $1.27. It reached its All-Time High on May 16, 2021 at $2.45. Its All-Time Low occurred on Mar 13, 2020 at $0.01925275.

1.e. The Objective Of The Project Behind Cardano (ADA)

Cardano (ADA), was born as what later known as the third generation blockchain, which set its goal to solve the problems encountered in the previous generation blockchains, Bitcoin (1st generation) and Ethereum (2nd generation), among others:

Scalability. Cardano targets a much higher level of scalability than the two previous generation blockchains.
Transaction fees. The first and second generation blockchains, in addition to having scalability problems that need to be improved, also require high fees for conducting transactions. Cardano (ADA) promises lower transaction fees.
Keeps it safe and decentralized. To achieve its goal as a blockchain that has higher scalability and keeps transaction costs lower than its predecessors, Cardano still does not sacrifice security and decentralization.

1.f. The Founder of Cardano (ADA)

Charles Hoskinson is the man who has founded Cardano (ADA). He is also one of the co-founders of the Ethereum network. According to Wikipedia, Hoskinson was born in 1987 or 1988.

^{Photo of Charles Hoskinson as seen on https://iohk.io/en/team/charles-hoskinson.}

Hoskinson got involved with the cryptocurrency in 2011 when he started mining and trading cryptocurrencies. In 2013, Hoskinson co-founded Invictus Innovations with Dan Larimer to launch BitShares Network. Then, in 2013 he introduced an online educational course about Bitcoin called Bitcoin Education Project. More than 80,000 people took the course. While running the Bitcoin Education Project, Hoskinson met with Vitalik Buterin who later together with six others they founded Ethereum.

Hoskinson left the Ethereum project in June 2014 due to an argument with Buterin. They have different opinions on how Ethereum should be run: Hoskinson wants it to be a for-profit organization with a formal leadership structure, while Buterin wants Ethereum to be an open-source and decentralized non-profit entity.

Still in 2014, Hoskinson in collaboration with a former Ethereum employee, Jeremy Wood, established a project called Input Output Hong Kong (IOHK). IOHK is a research and engineering company working in the development of blockchains and cryptocurrencies.

^{IOHK logo as seen on https://iohk.io/en/blog/posts/2017/10/17/statement-on-iohks-ada-holdings/.}

In 2015 IOHK's key project, Cardano blockchain was established, it was the year they started developing the blockchain and its token, ADA. Cardano blockchain and its token, ADA, were officially launched in 2017. Cardano is a public blockchain, is open-source and adopts a decentralized system. Cardano reached consensus by utilizing the Proof of Stake (PoS) algorithm. The native cryptocurrency of the Cardano blockchain is symbolized ADA. Cardano can facilitate peer-to-peer transactions between users by leveraging its native coin ADA. As the organization responsible for the development of Cardano, Cardano Foundation has its head office in Zug, Switzerland.

1.g. The Roadmap of Cardano (ADA)

There are 5 main phases have been formulated in the development of Cardano (ADA), namely:

Phase 1, called Byron. This is also known as The Foundation Era. In this phase the network is made available and working to perform its most basic function, producing ADA.
Phase 2, called Shelley or The Decentralization Era. In this phase, efforts are made to decentralize the network with nodes run by the community.
Phase 3, called Goguen or Smart Contract Era. In this phase, Smart Contracts are rolled out onto the network and enabled.
Phase 4, called Basho (Scaling Era). In this phase sidechain is introduced, increases scalability and interoperability.
Phase 5, called Voltaire (Governance Era). In this phase, governance and self-funding are formed, which makes ADA fully decentralized.

1.h. The Specific Purpose of Cardano (ADA)

In terms of technology development, Cardano wants to become a blockchain that has high scalability and is sustainable, as well as environmentally friendly with low energy use. In terms of technology application in life, Cardano wants to bring about positive global change through the application of their technology into various areas of life. Because of this, Cardano calls itself a blockchain for changemakers, innovators, and visionaries.

2.) Explain in your own words what the "Evening Star" pattern consists of. What is its hit rate?

Evening Star pattern consists of 3 candlesticks:

The first candlestick is a big bullish candlestick, which is part of an uptrend.
The second one has a smaller body, this candle could be a bearish or a bullish or neutral.
The third candlestick is a bearish candlestick that has longer body than the second candlestick. The length does not need to be the same as the first candlestick, but the close price position must exceed half of the body of the first candlestick. This is confirmation of the formation of the evening star pattern.

Evening star pattern occurs to end the uptrend pattern and starts a downtrend. Below is the picture of an Evening Star pattern.

^{Image drawn with Adobe Photoshop CS 3.}

We can see it occurred on a chart on the picture below.

^{Screenshot from https://www.coingecko.com/en/coins/litecoin.}

According to varchev.com, as published in this article, the Evening Star pattern success rate is 72%.

3.) Explain in your own words what the pattern "Abandoned Baby" consists of. What is the percentage correct?

The Abandoned Baby candlestick pattern is a sign of a trend reversal. As soon as this pattern appears on the technical analysis chart, it means that the current price movement will reverse and give traders a precise position, the result of which is likely to be in the traders favor. But because it is quite difficult to identify this unique formation, less experienced traders may miss it even if there is an opportunity to take advantages from the pattern.

The Abandoned Baby candlestick pattern is similar to the Morning Star or Evening Star, but with a fundamental difference. Just like the morning star and evening star patterns, the abandon baby pattern also consists of three candles.

The first candle is a candle that moves in the main direction of the trend.
The second candle is a candle with a doji pattern. This candle does not overlap between real body and shadow. This candle is what differentiates this pattern from the morning star and evening star.
The third candle is a candle that moves in the opposite direction (a change in the direction of the trend is formed).

The Abandon Baby pattern is divided into two types: Bullish Abandon Baby and Bearish Abandon Baby. Bullish Abandon Baby starts with a bearish candle. While the Bearish Abandon Baby with a bullish one.

The Bearish Abandon Baby pattern is shown in the picture below.

And below is the picture of the Bullish Abandon Baby pattern.

According to varchev.com, as published in this article, the Abandon Baby pattern success rate probability is 71%.

4.) Perform analysis for 3 and 7 recent calendar days for Bitcoin. Do you identify any patterns?

4.a. Bitcoin 3 Day Chart

Below is the 3-day price chart of BTCIDR as seen on id.upbit.com.

^{Source: https://id.upbit.com/exchange?code=CRIX.UPBIT.IDR-BTC.}

On the picture above I identified 3 candlestick patterns: 1 Three White Soldiers, 1 Three Black Crows and 1 Evening Star. Three White Soldiers and Three Black Crows and Evening Star patterns fall into the category of reversal candlestick patterns. That is, after the formation is perfectly formed, there is a potential that the direction of price movement will change from the previous trend. If previously the price was bullish, it will reverse down. Meanwhile, if previously the price was bearish, it will go up. That way, if a trader can catch the moment of a price reversal, then the opportunity to make good profit is wide open. That is the reason why the reversal candlestick pattern is sought after by traders. Here are the characteristics of the three patterns:

Three White Soldiers is indicated by the appearance of three consecutive candlesticks with the closing price always higher; usually white or all green (bullish). Therefore, the Three White Soldiers indicate the potential that the price will reverse up from the previous downtrend.
Three Black Crows pattern is characterized by three consecutive black or red (bearish) candlesticks with the closing price always lower. This candlestick indicates the potential that the price will reverse down after the previous uptrend period.
Evening Star pattern is initiated by a bullish candle during an uptrend. The main point of this candle formation is a small body candle or doji that slipped from the previous candle. Formation is complete after the third candle closes lower than the close of the doji and is at least half of the first candle.

4.b. Bitcoin 7 Day Chart

Below is the 7-day price chart of BTCIDR as seen on id.upbit.com.

^{Source: https://id.upbit.com/exchange?code=CRIX.UPBIT.IDR-BTC.}

On the chart I was able to identify four patterns: 2 Three White Soldiers, 1 Morning Star, and 1 Evening Star. We talked about the Three White Soldiers and Evening Star patterns on the previous chart. Similar to the Three White Soldiers and the Evening Star, the Morning Star pattern also belongs to the category of reversal candlestick patterns. The Morning Star pattern is the opposite of the Evening Star pattern. If the Evening Star signals the start of a bearish trend, then the Morning Star signals the start of a bullish trend.

The Morning Star pattern is centered on a small body candle (or doji candle) with a jump from a bearish candle. Next, the doji candle will be followed by a bullish candle. The closing price of the 3rd candle is the key to the validity of the Morning Star pattern. The 3rd candle body length must at least exceed half the length of the first candle.