Week of 9 July 2018: Bitcoin falls 5.35% and Ether 7.56% on below-average volume
When two assets fall together for a week on lighter-than-usual volume, what does the shape of the week say, and what can price data alone never establish?
BTC fell from 6,712.10 to 6,353.01 (-5.35%) and ETH from 486.55 to 449.78 (-7.56%). Both hit their weekly lows in the same hour, 23:00 UTC on Thursday 12 July. Trading volume for both assets ran below its prior 12-week average, at 0.71 for BTC and 0.82 for ETH.
What the data shows. BTC reached its weekly high of 6,802.06 late on Monday 9 July, then declined to 6,070.00 at 23:00 UTC on Thursday 12 July, a range of 12.06%. ETH's high of 488.98 came in the first hour of the week, and its low of 416.94 fell in the same Thursday hour as BTC's, showing the two markets turned at the same moment (hourly correlation 0.82, a close relationship). Tuesday 10 July was the worst day for both: BTC -5.49% and ETH -8.32%, containing each asset's largest hourly move (-2.02% for BTC at 09:00 UTC, -2.90% for ETH at 11:00 UTC). Sunday 15 July was the best day for both (BTC +1.63%, ETH +3.83%), pulling both closes into the middle third of their weekly ranges.
What it does not show. Price records the path, not the reason or the participants. Volume was below its prior 12-week average for both assets, which describes how much was traded, not why, and says nothing about position sizes or forced selling. With only 21 weeks of history in this record, the week cannot be ranked reliably against a longer past.
What a careful desk would check. Realised volatility, the size of the swings that actually happened scaled to a yearly figure, was 38.8% for BTC and 59.2% for ETH, so a position sized on the calmest recent weeks would be tested by Tuesday's hour. The two assets turned together at the Thursday low, so a desk would ask whether its hedges were sized on the 0.82 correlation or on 1.0, and whether stops could fill in a -2.90% hour.
Ether against Bitcoin. ETH fell 2.21 percentage points more than BTC, and the ETH/BTC ratio dropped 2.33%, so ETH carried more of the decline. Over the prior four weeks ETH had been split (three down, one up) against BTC's even two-and-two, so the extra weakness is one week's reading, not yet a trend.
What would change this reading
- If a later week trades below BTC's low of 6,070.00 or ETH's low of 416.94, the Thursday turn was a pause rather than a floor.
- If ETH again falls more than BTC while the ratio keeps dropping, the relative weakness is becoming a pattern rather than a single week.
- If volume returns towards its prior 12-week average while price holds above these lows, the week reads as a quiet decline rather than the start of heavier selling.
- If BTC closes back above its weekly open of 6,712.10, the decline is absorbed and the mid-range close gains significance.
Terms
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- hourly correlation
- how closely two prices moved together hour by hour, from -1 to 1
- close location
- where the week's closing price fell within the week's high-to-low range