Week of 24 December 2018: Ether gains 6.77% while Bitcoin falls 3.25% in the same week
When two assets fall to their lows in the same hour yet finish the week 10 percentage points apart, what does the divergence measure, and what can it not tell us?
BTC fell from 3,929.71 to 3,801.91 (-3.25%) while ETH rose from 129.03 to 137.77 (+6.77%), a gap of 10.02 percentage points. Both hit their weekly low in the hour of 27 December 23:00 UTC and made their largest hourly move in the hour of 28 December 15:00 UTC. The ETH/BTC ratio gained 10.36%.
What the data shows. The two prices tracked each other closely hour by hour (correlation 0.89), reached their weekly lows in the same hour (23:00 UTC on Thursday 27 December: BTC 3,535.00, ETH 111.22), and posted their largest hourly moves in the same hour on Friday 28 December (+5.65% for BTC, +10.03% for ETH). That Friday was the best day for both: BTC +7.61%, ETH +18.95%. The paths then separated. BTC lost 6.59% on Tuesday 25 December and ended the week 3.25% below its open; ETH lost 12.02% on Thursday 27 December but recovered to a 6.77% weekly gain. The ETH/BTC ratio rose 10.36%, so part of the gap is Ether moving relative to Bitcoin rather than on its own. Trading activity differed too: ETH dollar volume was 2.66 times its prior twelve-week average, BTC's only 1.05 times.
What it does not show. The data cannot say why the two finished apart. It shows no sign of one asset leaving the other behind on any single hour; the gap accumulated from ETH rebounding more strongly on the shared moves, even though its own worst day was deeper than BTC's (-12.02% against -6.59%). Nothing here identifies who traded, or whether ETH's strength was new buying or positions being closed.
What a careful desk would check. Realised volatility (the size of the swings that actually happened, scaled to a yearly figure) was 91.3% for BTC and 174.5% for ETH, roughly double. ETH's weekly range was 41.76% against BTC's 18.76%. Both closed mid-range, at 40.3% (BTC) and 57.2% (ETH) of their weekly span, so neither finished near its high. ETH's return ranked at the 76th percentile of the 45 weeks recorded, but the four weeks before were -1.75%, -20.04%, -9.21% and 52.37%: large alternating swings, which makes any single week's ranking a weak guide.
What would change this reading
- If the ETH/BTC ratio holds above its level this week, the divergence reads as a change in the relative price rather than a one-week accident.
- If BTC trades back above its weekly open of 3,929.71 while ETH's volume falls towards 1.05 times its average, the week's gap was driven by activity that has since faded.
- If both assets close a later week below this week's lows (3,535.00 for BTC, 111.22 for ETH), Thursday 27 December was a step down rather than a floor.
- If realised volatility stays near 174.5% for ETH, position sizes set for BTC-like swings of 91.3% remain too large.
Terms
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- close location
- where the closing price sat within the week's high-to-low range, as a percentage
- hourly correlation
- how closely two prices moved together hour by hour, from -1 to 1