TrackCoin™: Real-Time Crypto Risk App

TrackCoin is an App that assesses market sentiment on the main cryptocurrencies on a real-time basis.

Track Coin App on phone
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Modelling Human Psychology

There are two ways of analysing any given market:
  • The first is the external approach. This involves the objective analysis of both trailing and leading economic indicators.
  • The second is the internal approach. This involves the analysis of market sentiment. Given that markets consist of human participants, when assessing market sentiment, we are really assessing human psychology. This is a more subjective approach. The approach that TrackCoin will employ.

The Crypto Market

The crypto market is a new and extremely volatile market, thereby exhibiting three properties:
  • The ability to provide high returns in a short timescale.
  • The risk of destroying significant value in a short timescale.
  • The price dynamic of crypto is deeply influenced by market sentiment.
    Identifying when the market turns “unsatisfied” can help protect against significant losses.

TrackCoin’s Origin in Neurosciences

Endel Tulving, a Canadian psychologist, became famous in the academic community in the 80s after studying the case of patient “K.C.” (for Kent Cochrane). Patient “K.C.” had sustained significant head trauma after a motorcycle accident, leaving him with a permanently damaged hippocampus.

The effect of this affliction developed into an unprecedented case of amnesia:
  • Endel Tulving observed that “K.C.” was able to recall the facts of various events,
  • but not his personal experience.

For example, “K.C.” remembered for the rest of his life that his brother had gotten married and could recognise family members in the wedding albums (the facts), but he had no memory of attending the wedding himself (the personal experience). His memories were devoid of any emotion.

It is through these observations that Endel Tulving made the distinction between episodic memory and semantic memory:
  • Semantic memory, derived from learned events, refers to the ability to process ideas, concepts and facts.
  • Episodic memory, being derived from lived events, is defined as the ability to recall and reexperience specific moments from one’s past.
Photo of Endel TulvingEndel Tulving

“K.C.”’s inability to access his episodic memories had a frightening consequence: He was completely incapable of planning his future.
The ability to make decisions is contingent on one’s ability to access their emotional response to past events. This is the inspiration behind Trackcoin’s method: Relating asset price dynamics to investors’ past emotional responses, giving an accurate depiction of the current market sentiment.

TrackCoin in Practice

What are the moments that are the most emotionally evocative for an investor over a given period? When the market price reached its lowest point and when it reached its highest point. The positive price disparity between the current price and the past low price brings satisfaction (the FIRST TREND), while the negative price disparity between the current price and the past high price, frustration (the SECOND TREND).

Market sentiment is a combination of competing trends, not a single trend.

For example, let us say that an investor enters the market on day one with $100, we observe three emotional responses over a given period:
  • If the index gradually rises to $120, by the end of the given period our investor will be happy.
  • If the price drops to $80 during the year, the emotional stress of the loss will be engraved in the investor’s memory. Any market rebound will provide some relief as it will mitigate some of the damage.
  • If the price then rises to $200 before falling to $120, by the end of the given period the investor may be satisfied with the relief from the low price yet frustrated at not having sold at the highest price. The satisfaction of gaining $40 is insufficient to compensate for the frustration of the forgone $80 gain.
BitCoin figureBitcoin figure

If we increase the number of investors in our model, we get an accurate representation of market sentiment. By grouping these investors into two competing positions, satisfied and frustrated, the decision-making process becomes binary.
TrackCoin tells you when the market is satisfied (IN), or frustrated (OUT).