Amplitude Modulation in Crypto

Amplitude modulation is common in most financial markets. However, using Hurst's 'Principle of Commonality' we can take advantage, especially in the relatively new market of cryptocurrency.

Amplitude Modulation?

Put simply amplitude modulation is the effect that one signal has on another. A composite modulated signal, generally imagined through summation of simple sine waves, is the result of combining two (or more) different signals together.

The recent move in July, from what is likely an 18 month nominal low in most cryptocurrencies, gives us a chance to look at a few of the main players and compare apples to apples amplitude modulation. Cryptocurrency is fantastic in that at the 18 month nominal degree and below the frequency modulation of the components is extremely low. Hurst included frequency modulation in the ‘principle of variation’ and it can be a tricky concept to accept. Inherent in this approach to technical analysis is the acceptance that some portion of price motion is infact random and some portion driven by fundamental events. This is manifested somewhat as the principle of variation in a formal phasing analysis. More concretely and numerically, variation…