Section 10 - Chapter 7 - Digital Assets - CMT Level 1 2025 Exam Syllabus

Section 10 - Chapter 7 - Digital Assets - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus

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1. Chapter 7 – Digital Assets SECTION 10 - COMPARATIVE MARKET ANALYSIS Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda What Are Digital Assets? The Evolution of Digital Assets Why Do They Exist? The Economics and Governance of Block chain Networks Categorizing Digital Assets Trading Hours/Sessions/Sessions per Week Unique Data for Cryptocurrencies Do Digital Assets Have Intrinsic Value or Fundamentals? The Evolving Market Structure of Digital Asset Trading Unique Events in the Digital Asset Market Why Technical Analysis (TA) is Perfectly Suited for Cryptocurrencies and Digital Assets This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Digital Assets Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Digital Assets Digital assets are any form of content or value stored digitally that can be owned or controlled by individuals or organizations. They can be categorized into various types, including: 1. Cryptocurrencies – Bitcoin, Ethereum , and other blockchain -based digital currencies. 2. Non-Fungible Tokens (NFTs) – Unique digital collectibles, art, music, or real estate on the blockchain . 3. Digital Documents – PDFs, Word files, and other text-based digital files. 4. Media Files – Photos, videos, music, and graphics stored digitally. 5. Intellectual Property (IP) – Copyrights, trademarks, patents, and software licenses. 6. Domains & Websites – Domain names, website content, and online businesses. 7. Virtual Goods – In-game items, skins, and digital real estate in virtual worlds. 8. Cloud-based Data – Files, emails, and databases stored on cloud services.

5. The Evolution of Digital Assets The evolution of digital assets has been shaped by technological advancements, the rise of the internet, and innovations in blockchain technology. Here’s a breakdown of how digital assets have evolved over time: 1. Early Digital Assets (1980s–1990s) • Digital Files & Media: With the rise of personal computers, digital files such as documents, images, and videos became common. • Early Online Commerce: The emergence of the internet led to digital products like e-books and downloadable music. • Domain Names: The first digital real estate assets, domain names, became valuable as the internet expanded.

6. The Evolution of Digital Assets 2. The Dot-Com Boom & Internet Expansion (2000s) • E-Commerce & Digital Transactions: PayPal and other online payment platforms made digital financial transactions easier. • Cloud Storage & Digital Data: Companies like Google Drive and Dropbox enabled businesses and individuals to store and manage digital files online. • Virtual Goods & Gaming Assets: Online games introduced in-game currencies and virtual items that could be bought and sold.

7. The Evolution of Digital Assets 3. The Rise of Cryptocurrencies & Blockchain (2010s) • Bitcoin & Decentralized Currencies: Bitcoin (2009) introduced the first decentralized digital currency. • Altcoins & Smart Contracts: Ethereum (2015) expanded blockchain use with smart contracts, enabling decentralized applications ( DApps ). • Tokenization: Digital assets like real estate, stocks, and art started being tokenized on the blockchain . • Non-Fungible Tokens (NFTs): The rise of NFTs allowed for unique digital collectibles, art, and virtual assets to gain value.

8. The Evolution of Digital Assets 4. Mainstream Adoption & Web3 (2020s–Present) • NFT Boom: Digital art, gaming items, and virtual real estate saw explosive growth with platforms like OpenSea . • Metaverse & Virtual Assets: Companies like Meta (formerly Facebook) and Decentraland developed digital worlds with assets like virtual land. • Central Bank Digital Currencies (CBDCs): Governments started exploring digital versions of their national currencies. • Regulation & Security: Governments and financial institutions are working to regulate and secure digital assets while maintaining innovation.

9. The Evolution of Digital Assets 5. Future of Digital Assets • AI-Generated Digital Assets: AI-created content and media will become valuable digital assets. • Tokenization of Real-World Assets: Real estate, stocks, and even identity verification could be tokenized on blockchain . • Decentralized Finance ( DeFi ): More financial services will be conducted through decentralized, blockchain -based platforms. • Interoperability & Standardization: Digital assets will become more seamless across different platforms and blockchain networks. Digital assets have evolved from simple online files to complex, blockchain -backed financial instruments, shaping the future of finance, entertainment, and ownership.

10. Categorization of Digital Assets

11. Categorization of Digital Assets

12. Categorization of Digital Assets

13. Categorization of Digital Assets

14. Trading Hours/Sessions/Sessions per Week 1. Trading Hours for Digital Assets ✅ 24/7 Trading – Digital assets, including cryptocurrencies, are traded 24 hours a day, 7 days a week, with no closing hours. ✅ No Holidays – Unlike stock exchanges, crypto markets do not close on weekends or public holidays. ✅ Global Market – Trading occurs across multiple exchanges worldwide, ensuring continuous liquidity. 2. Trading Sessions Per Week • Crypto & Digital Assets: 7 days a week (24/7, no breaks). • Tokenized Stocks & Assets: If hosted on blockchain , can be 24/7, but some follow traditional market hours. • NFTs & Digital Collectibles: Traded anytime but demand may peak during certain market hours.

15. Market Sessions Market Sessions for Crypto & Digital Assets Even though crypto operates 24/7, trading volume and volatility vary depending on global financial market activity. Key Insights 🚀 Highest Volatility: Overlaps between sessions (e.g., London & New York) see the most liquidity. 📉 Lower Liquidity on Weekends: Fewer institutional traders lead to thinner order books. 💹 Best Trading Times: During major financial market hours (especially US & EU session overlaps). Session Time (UTC) Key Markets Active Impact on Crypto Market Asian Session 00:00 – 09:00 Tokyo, Shanghai, Hong Kong High volume from Asia; early market movements European Session 08:00 – 17:00 London, Frankfurt Increased institutional activity; price volatility US Session 13:00 – 22:00 New York, Chicago Peak trading volume; high volatility Weekend Session 22:00 Fri – 23:59 Sun Global retail traders Lower liquidity, but potential price swings

16. Do Digital Assets Have Intrinsic Value or Fundamentals? 1. Intrinsic Value: Do Digital Assets Have It? What Is Intrinsic Value? • Intrinsic value refers to the inherent worth of an asset, often based on cash flows, utility, or scarcity. • Traditional assets like stocks derive value from company earnings, and commodities derive value from industrial use. How Digital Assets Differ • Cryptocurrencies: No physical form, but derive value from security, network adoption, and scarcity (e.g., Bitcoin). • NFTs & Virtual Assets: Value is based on ownership, uniqueness, and demand. • Stablecoins : Pegged to fiat currencies, aiming to maintain a stable intrinsic value. 💡 Conclusion: Many digital assets don’t have “intrinsic value” in the traditional sense but derive worth from other fundamentals.

17. Do Digital Assets Have Intrinsic Value or Fundamentals? 2. Fundamental Value of Digital Assets Instead of earnings reports or dividends, digital assets are valued based on network fundamentals, utility, scarcity, and adoption. a. Supply & Scarcity ( Tokenomics ) • Fixed Supply: Bitcoin has a hard cap of 21M BTC, making it scarce like gold. • Deflationary Models: Ethereum’s EIP-1559 burns ETH, reducing supply over time. • Token Issuance & Inflation: Some cryptos (like Dogecoin ) have an unlimited supply, diluting value over time. b. Network Effects & Adoption • The Metcalfe’s Law principle applies: more users = more value. • Examples: o Bitcoin’s value grows as more people use it as digital gold. o Ethereum’s value depends on dApps , DeFi , and NFT activity. o Solana and Avalanche gain value based on developer adoption and transaction speed.

18. Do Digital Assets Have Intrinsic Value or Fundamentals? 2. Fundamental Value of Digital Assets c. Utility & Use Cases • Smart Contract Platforms: Ethereum , Solana, and Cardano power DeFi , NFTs, and dApps . • Payments & Transactions: Bitcoin, Litecoin , and XRP function as payment networks. • Store of Value: Bitcoin and some NFTs act as digital collectibles or reserves. d. On-Chain Metrics • Active Wallets: More active users = stronger fundamentals. • Transaction Volume: High activity signals strong adoption. • Total Value Locked (TVL): Shows the strength of DeFi projects on a blockchain . e. Institutional & Retail Demand • Institutional adoption (Tesla, MicroStrategy buying Bitcoin) adds credibility. • Retail speculation can drive prices higher (e.g., meme coins like Dogecoin ).

19. Comparing Digital Assets to Traditional Assets Comparing Digital Assets to Traditional Assets Factor Traditional Assets (Stocks, Real Estate, Commodities) Digital Assets ( Cryptos , NFTs, Tokens) Intrinsic Value? Based on earnings, land, or physical use Derived from scarcity, network use, and demand Cash Flow? Companies generate revenue & profit Some DeFi tokens generate yield (staking, lending) Scarcity? Some (gold, land, rare art) Many digital assets are programmed to be scarce Network Effects? Limited (brand loyalty, users) Strong—value grows with user adoption Speculation Impact? Exists, but less dominant Speculation drives short-term price swings Regulation? Well-established frameworks Evolving, uncertain in many regions

20. The Evolving Market Structure of Digital Asset Trading 1. Market Participants: Retail vs. Institutional Players 🔹 Retail Traders – Historically dominated early crypto markets through centralized exchanges (CEXs). 🔹 Institutional Investors – Hedge funds, family offices, and traditional financial firms have entered, increasing market sophistication. 🔹 Market Makers & Liquidity Providers – Ensure smooth order flow and tighter spreads (e.g., Alameda Research, Wintermute ). 🔹 Decentralized Finance ( DeFi ) Users – Engage in peer-to-peer trading without intermediaries. 🔹 Regulators & Governments – Increasing oversight and compliance requirements (e.g., SEC, CFTC, MiCA in the EU).

21. The Evolving Market Structure of Digital Asset Trading 2. Trading Venues: Centralized vs. Decentralized a. Centralized Exchanges (CEXs) 📊 Examples: Binance , Coinbase , Kraken, OKX ✅ Pros: High liquidity, institutional support, fiat on-ramps ❌ Cons: Custodial risks, regulatory scrutiny b. Decentralized Exchanges (DEXs) 🔗 Examples: Uniswap , Sushiswap , dYdX , Curve Finance ✅ Pros: Non-custodial, permissionless , censorship-resistant ❌ Cons: Lower liquidity (vs. CEXs), front-running risks c. Hybrid & Alternative Trading Systems (ATSs) ⚖️ Examples: Coinbase Prime, FalconX (institutional-grade platforms) ✅ Pros: Combines CEX liquidity with regulatory compliance ❌ Cons: Still evolving, limited retail access

22. The Evolving Market Structure of Digital Asset Trading 3. Market Microstructure: Key Trading Elements a. Order Types & Execution Models • Limit & Market Orders – Standard execution methods. • Algorithmic Trading – Used by institutions for high-frequency trading (HFT). • Automated Market Makers (AMMs) – DEX model replacing traditional order books with liquidity pools (e.g., Uniswap ). b. Derivatives & Structured Products • Futures & Perpetual Swaps – Popular for leveraged trading (e.g., Binance , Bybit ). • Options & Structured Notes – Growing institutional demand (e.g., Deribit ). • Tokenized Stocks & ETFs – Bridging traditional finance ( TradFi ) with crypto. c. Stablecoins as Liquidity Anchors • USDT, USDC, DAI – Serve as trading pairs and reduce volatility.

23. The Evolving Market Structure of Digital Asset Trading 4. Regulation & Market Maturity 📌 Early Days (2010–2016): Unregulated, dominated by retail traders. 📌 Growth Phase (2017–2020): ICO boom, rise of exchanges, institutional curiosity. 📌 Maturity Phase (2021–Present): Institutional adoption, government regulations, ETF approvals. Regulatory Trends • KYC/AML Compliance – Major exchanges require verification. • MiCA (EU), SEC Oversight (US) – Clearer frameworks emerging. • Security Token Regulations – Growing discussion around compliant tokenized assets.

24. ETFs: Bridging Traditional Finance and Digital Assets 1. What Are Crypto ETFs? A crypto ETF is an investment vehicle that tracks the price of a digital asset or a basket of digital assets. It trades on traditional stock exchanges, allowing investors to gain exposure to cryptocurrencies without needing to manage private keys or crypto wallets. Types of Crypto ETFs 🔹 Spot ETFs – Directly hold the underlying asset (e.g., Bitcoin, Ethereum ). 🔹 Futures ETFs – Track cryptocurrency futures contracts instead of the actual asset. 🔹 Thematic Blockchain ETFs – Invest in companies involved in blockchain technology, rather than crypto itself.

25. ETFs: Bridging Traditional Finance and Digital Assets Key Advantages of Crypto ETFs ✅ Regulated & Secure: Listed on major stock exchanges, reducing risks of hacks and fraud. ✅ No Private Keys Needed: Investors don’t need to manage wallets or custody solutions. ✅ Tax Efficiency: Easier tax reporting compared to direct crypto transactions. ✅ Liquidity & Accessibility: Can be traded like stocks on traditional markets. ✅ Institutional Participation: ETFs enable hedge funds, pension funds, and asset managers to allocate capital into crypto.

26. ETFs: Bridging Traditional Finance and Digital Assets Major Crypto ETFs & Developments a. Spot Bitcoin ETFs (Most Anticipated Development) • Directly hold Bitcoin (BTC), allowing real price exposure. • Approved in Canada (Purpose Bitcoin ETF) and EU, but historically rejected in the US—until 2024, when major Spot Bitcoin ETFs (BlackRock, Grayscale, Fidelity) launched. b. Bitcoin & Ethereum Futures ETFs 🚀 • Approved by the SEC in the US (e.g., ProShares Bitcoin Strategy ETF). • Tracks futures contracts instead of holding actual crypto. • More volatile than spot ETFs due to contract rollovers. c. Blockchain & Web3 ETFs • Invest in publicly traded blockchain -related companies (e.g., Coinbase , Nvidia , MicroStrategy ). • Examples: Amplify Transformational Data Sharing ETF (BLOK), Bitwise Crypto Industry Innovators ETF (BITQ).

27. Why Technical Analysis (TA) is Perfectly Suited for Cryptocurrencies and Digital Assets Crypto Is Driven by Speculation & Market Psychology Crypto’s High Volatility Makes TA More Effective Liquidity & Market Structure Fit TA Models 24/7 Market Means Constant TA Relevance TA Works Best in Markets Without Fundamental Valuations 🔹 Final Takeaways 🔹 ✅ TA works well for crypto because of high volatility, market psychology, and price-driven behavior. ✅ Liquidity, order book depth, and whale movements align with TA models. ✅ Unlike stocks, crypto lacks intrinsic valuation models, making TA the primary analysis tool. ✅ The 24/7 market ensures TA remains continuously relevant without overnight gaps.

28. Chapter 8 - Options SECTION 10 - COMPARATIVE MARKET ANALYSIS Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia