Will the chip distribution index URPD become invalid after being listed on CEX coin?

#URPD Chip distribution #BTC ETH

Today, I will address an important question that my friends often ask: Will the chip distribution of a coin become ineffective if it is listed on a CEX?

First of all, the long-term practical experience of using the URPD has proven that the indicator will not fail. The URPD indicator is first used on BTC, and BTC's trading accounts for more than 90% on CEX, and CEX contract volume accounts for more than 90% of all volume. Even in this case, the URPD indicator of BTC still guides the trading very effectively, why is that?

The reason is that there are two forces maintaining the balance of all markets, one force is Arbitrage robots (or Arbitrage bricklayers), and the other force is the CEXexchange itself.

Arbitrage robots will continuously search for imbalanced water levels in different markets, and then complete arbitrage by buying on one side and selling on the other side. When a certain amount is reached, the funds of the arbitrage robots in different exchanges will become one-sided. That is, there are only U at exchange A and only coins at exchange B. It needs to achieve a balance by transferring U from A to B and transferring coins from B to A, and then restart the arbitrage. Such transfers will leave traces of chip movement on-chain.

CEXexchange is a platform that matches long and short trades. In a one-sided market, there is often a temporary imbalance between long and short forces. If the long side has an absolute advantage and drives the price up, there may be a situation where there are no trading counterparts. In such cases, CEX first uses the risk fund for dumb buying (the risk fund is accumulated from the liquidation fees of liquidated users). When the risk fund drops to a certain percentage, CEX will activate the ADL risk control mechanism, which forcibly closes positions of profitable users. If neither of these steps achieves the desired risk control effect, CEX will expose itself to unilateral risk by throwing the imbalanced long positions to other exchanges for dumb buying. During this process, there will be traces of currency transfer on-chain. Of course, before CEX takes action, there are already arbitrage robots performing on-chain position balancing due to the imbalance in the market.

Based on the role of these two forces on-chain, the distribution of chips will accurately reflect the current market situation. However, when using chip distribution, it is important to be clear about its applicable and non-applicable scenarios in order to achieve the best results.

First, chip distribution is very suitable for viewing long-term cycles, rather than short-term or super short-term within a day. This is because the balance mechanism of Arbitrage robots and CEX is generally not completed in a short period of time, but usually needs to be balanced once a day or every two to three days, so a larger cycle (over three days) is a reasonable reference period.

Second, chip distribution does not apply to stand alone coins. If a currency is only listed on one exchange and more than 90% of its trading volume occurs on that exchange, it is a stand alone coin. Dominating dealers will control the market trend on the exchange and exploit their advantages to forcibly harvest suckers. Such currencies should be avoided, and no universal indicators will be effective. If a currency is listed on more than one exchange, the chip distribution will be particularly effective as a result of the market's full game.