Why The Graph Has a Bullish Graph (& Is a Must-Have Cryptocurrency)

According to the Chinese zodiac, 2021 is the Year of the Ox. But when the history of this era is recorded, 2021 will be recognised as the year when blockchain projects went mainstream. While closely related to cryptocurrency, it's worth keeping in mind that blockchain is the technology that enables the existence of cryptocurrency while cryptocurrency is simply a medium of exchange. Of course, cryptocurrencies are not the only thing blockchains enable. The Graph blockchain, for instance, supports the indexing of blockchain data from Ethereum (ETH) and Filecoin

What Is The Graph (GRT)?

To put it simply, Graph is the Google of blockchains. The Graph (GRT) is an Ethereum token that powers The Graph. This is a decentralized protocol for indexing and querying data from blockchains and the Graph indexes blockchain data from networks like Ethereum and Filecoin. This data is grouped into open APIs called subgraphs that anyone can query using the GraphQL API. The main idea behind GraphQL was to develop an SQL like language to describe the data and provide a means to ask for only what the user wants on top of web APIs, thereby providing concise responses whilst avoiding data clogging. GraphQL also protects the query from breaking as a consequence of API upgrades. By making blockchain data accessible, the Graph enables decentralized finance (or DeFi) applications like DEXs to obtain the data they need to operate effectively.

The GRT Price Action

Over the past couple of months, GRT has had quite a rocky journey. While GRT has been on a steep upswing since the start of August 2021, it had undergone a sharp fall in July 2021 from a previous high in June 2021

Figure 1: Daily Changes in the GRT Price Action From June-August 2021

GRT reached its highest price on Feb 12, 2021, when it was trading at its all-time high of $ 2.87 whereas its lowest price to date has been $0.17. GRT started trading at an initial price of $ 0.03 at the end of its ICO on Oct 25, 2020. As things stand, GRT price has increased 29.51x against US Dollar and increased 8.33x against Bitcoin. Quite a journey for an altcoin that was launched only in late 2020. GRT prices have shown a pretty volatile range and we can see in figure 1, GRT prices show pretty steep changes from one day to the next. While tumultuous price actions are a part and parcel of most cryptocurrency journies (check out my Youtube video on Bitcoin price action: https://www.youtube.com/watch?v=Wa-hIgMO27w), now is a good question to ask if the GRT is enjoying a temporary bounce (as a result of rising Bitcoin prices) or is this the start of a GRT bull run?

The Role of Bitcoin Prices on GRT Price Action

Bitcoin is the gold of the crypto world. So Bitcoin prices play an important role in influencing altcoin price action. While correlation is not causation, I thought it would be a good idea to see how the daily percentage changes in the different BTC and GRT parameters related to each other using Pearson's correlation coefficient (r).

Figure 2: Correlation Between the Daily Percentage Change of the Different BTC and GRT Price Parameters

As expected, the different parameters are related both within and across the two cryptocurrencies. For instance, the percentage change in the low price of BTC and GRT had a Pearson's correlation coefficient (r) of 0.56 while the correlation of the former with the percentage change in high, open and close GRT values was 0.33,0.31 and 0.37 respectively. Perhaps the strangest of the associations is of the percentage change in daily volume; r=0.12 between the percentage change in BTC and GRT daily volume. It is quite astounding that the percentage change in the trading volume of a relatively new cryptocurrency could have any association with the percentage change in the daily BTC trading volume. But there you are. So as things stand, BTC does seem to exert influence on GRT price action. A figure of the daily percentage change in the opening prices of BTC and GRT (from January 2021-July 2021) shows a similar pattern, although the fluctuations have been greater for GRT

Figure 2: % Change in Daily Opening Prices For BTC (Blue) and GRT (Orange)

So on 19th May 2021 when the Bitcoin prices crashed, it seems the GRT prices followed suit, although the magnitude of fluctuation was greater; GRT prices fell from $1.23 to $0.75. However, this is not at all surprising as the strength of association between the percentage change in opening prices of GRT and BTC is 0.57. At this point, I am not going to attempt to forecast GRT price action and its future prognosis. However, like most other cryptocurrencies, GRT's price action remains intertwined with the BTC price action. Only time will tell at what juncture will GRT and indeed other cryptocurrencies decouple from the BTC price action. However, the ongoing coupling could result in GRT having massive upward price jumps when BTC starts a bull run, making it potentially profit-making.