The CoinSpeech team collected the most important insights from Benjamin Cowen’s recent appearance. Find Benjamin Cowen’s new video below.
Understanding the Advanced Decline Index
Benjamin Cowen dives deep into the Advanced Decline Index (ADI), a popular tool in stock trading that assesses the breadth of market movements. As Cowen explains, “It’s always interesting to see like, is the market going up together or are a few things doing well and everything else just kind of bleeding to those few things.” This index provides valuable insights into whether a general market rally is supported broadly across different assets or driven by a few standout performers.
Comparing Different Market Phases
Cowen emphasizes how the Advanced Decline Index reflects different phases of market cycles, particularly in the context of the top 100 cryptocurrencies. He states, “If you look closely at the ADI, once the 2017-2018 peak occurred, the ADI dropped until after the FED pivoted.” This observation highlights how different policy environments, such as the Federal Reserve’s quantitative easing (QE) or tightening (QT), deeply impact market dynamics, reflected clearly through the ADI.
Bitcoin Dominance vs. Altcoins
“As Bitcoin dominance goes up, the alts are bleeding back to Bitcoin,” Cowen notes, illustrating the current market scenario where Bitcoin outperforms most altcoins. The performance gap between juggernauts like Bitcoin and major altcoins (e.g., Ethereum, ADA, Avalanche, Matic) is widening, stressing the risky nature of the altcoin market. For instance, Cowen mentions, “If you look at ADA, it’s closer to the lows than the highs…these have been nice moves, but they still haven’t really gone anywhere.”
Survivorship Bias in Altcoins
One of the key insights Cowen shares is the concept of survivorship bias in altcoin evaluations. He cautions, “For every altcoin that’s done really well, there’s probably 10 more that haven’t done well.” This highlights the challenges and risks involved in altcoin investments where only a few manage to perform well while many lag significantly.
Future Implications and Market Health
Looking forward, Cowen discusses the importance of watching the ADI as an indicator of market health. He mentions, “If you wanted to see the health of the asset class return, then you would like to see something like the ADI putting in durable higher lows and higher highs.” Additionally, the video’s analysis points out the correlation between social interest in crypto and the movements of altcoins.
You can watch Benjamin Cowen’s new video for a more detailed analysis: