New Sansheets Model - Which Assets are Profits Being Taken On, and Which are Seeing Some Juicy FUD?
One of our new metrics that we recently introduced has shown some serious promise in providing serious alpha on where markets are heading next. The "Ratio of on-chain transaction volume in profit to loss" may sound like a mouthful. But it offers traders the opportunity to see whether transactions are of the profit taking variety, or whether they are exiting at a loss.
If you're wondering why this matters so much, look no further than our Network Realized Profit/Loss metric. Although spikes on this metric can sometimes be misleading, it certainly has some merit as a legitimate leading indicator:
NRPL measures the overall realized profit or loss at any given time to see when traders are profiting or losing money excessively. In a sector like cryptocurrency, one trader's capitulation is another trader's perfect buy-low opportunity.
Just like the vast majority of sectors, crypto is a zero sum game with scarce supply that gains value over time. And if there is an excessive amount of profit, markets generally counteract that by causing losses. Vice versa, markets tend to swing up if there are drastic losses on the network.
Transaction Volume in Profit to Loss
With the Ratio of Transaction Volume in Profit to Loss metric, we are simplifying the extremes that NRPL gives us with its large spikes. Instead of summing the total amount of profits or losses a network is seeing, this metric shows how those profits and losses directly compare to one another.
This metric isn't skewed by high or low volume days. Whether the network is active or more dormant, there will always be an informative ratio between how many transactions occurred while those coins were worth more than when they got to that address, or whether they were worth less.
Compared to Network Realized Profit/Loss, tops and bottoms are a bit more precise to identify. At least for finding local tops, the vast majority of days for most assets where they are seeing a significant positive spike in trader profits, the price of the asset generally flattens or pulls back in the upcoming day or two.
The only issue is that it can be a slow process waiting for a massive spike where there are 5x as many profits being taken as losses (implying that you yourself would want to consider profit taking). This is why we found a solution to plot many top assets on the same graph to make it easy which coins are seeing extreme profits vs. losses (or vice versa).
New Sansheets Model
Our new Sansheets model allows our Sanbase PRO community to visually contrast and compare which networks have a high amount of profits taken vs. losses traders are capitulating out of. High red spikes mean there is an immense amount of profits being taken, and a local top is more likely.
Low green spikes mean there is an immense amount of traders exiting their positions at a loss, and a bottom is more likely.
At the time this screenshot was captured, there was actually quite a bit of profit taking going on, which makes sense because markets are currently on a pretty notable upswing. You can see the small black and gray bars using the right y-axis to show what their 1-day (black) and 7-day (gray) price returns are, respectively.
In the example above, Aave, Binance Coin, Coin98, Shiba Inu, Skale, and Synthetix are all indicating there is at least 3x (200% or above) as much profit taking transactions as there are transactions happening at a loss. So these would be higher probability price top candidates.
On the other end of the spectrum, Ethos, Liquity, Raydium, Swissborg, and Uma are all seeing at least twice as many transactions taken at a loss as there are being taken in profit. So these would be higher probability price bottom candidates.
You'll also notice that most assets have both a large number and a small number. The large simply is the one-day ratio of transactions in profit vs. loss. The smaller one is a longer term ratio for those with a more hodler mentality - representing a 7-day average ratio.
Another subtle helpful indicator is a black horizontal line, showing the average 1-day ratio of all the assets shown on the chart. And the gray horizontal line is the average 7-day ratio of all assets. This can quickly help you identify whether markets, in general, are seeing a high or low ratio in both the short (1-day) and mid-term (7-day) timeframes.
Upon accessing it yourself for the first time, you can head to the Ratio Tx in Profit Loss Data tab and actually change the slugs in Row 1 to the assets you care about most, and you can also delete several of them if you would like to look at a smaller sample size of assets.
How to Use it!
If you'd like access to this brand new Sansheets spreadsheet, you can access it here. Remember that you will only be able to access the model and load Santiment's API data for it if you are a Sanbase PRO member, which you can sign up for here if you aren't a member already.
Once you have your Sanbase PRO account (or if you already do), you'll then want to use the link to the model above and follow these steps on the Google Sheets file:
- Go to File -> Make a Copy
- Download Sansheets. These are easy instructions to do so.
- Plug in your API
- Give the newly created copy you made a quick browser refresh and wait a couple of minutes to watch if data is loading
- If you're having trouble getting the data to load on a model, head to the 'Data' tab on the far right of the spreadsheet, and go to the yellow cell. Then delete the cell formula, and hit Undo. This should manually refresh the data.
Should you have difficulty navigating the spreadsheet with your PRO account and need some assistance, you can feel free to DM Brian on Discord, and he can walk you through getting everything set up!
Disclaimer: The opinions expressed in the post are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product.
Thanks for reading!
If you enjoyed this insight please leave a like, join discussion in the comments and share it with your friends!
Never miss a post from brianq!
Get 'early bird' alerts for new insights from this author