Week of 9 March 2020: Bitcoin falls 33% and Ether 38% in a single week
When a market loses a third of its value in one week, how much of the loss came from a single day, and what does that mean for risk limits set during calmer weeks?
BTC fell from 8,034.76 to 5,361.30 (-33.27%) and ETH from 199.43 to 123.78 (-37.93%). The worst day, 12 March, took 39.51% off BTC on its own. The weekly return ranked at the 0th percentile of the 108 weeks recorded before it.
What the data shows. The week opened near its top: BTC's high of 8,179.31 came in the first hour on Monday. The low, 3,782.13, arrived at 02:00 UTC on Friday 13 March, a range of 116.26% from low to high. The largest single hourly move was -18.21%, in the hour starting 10:00 UTC on Thursday 12 March. Ether moved with Bitcoin almost hour for hour (hourly correlation 0.95) but fell further, so the ETH/BTC ratio dropped 6.98%. Trading activity rose: BTC dollar volume was 2.33 times its average over the prior twelve weeks.
What it does not show. Price candles record how far and how fast the market moved, not why. Nothing in this data identifies who was selling or whether the selling was forced. The rebound on 13 March (+16.22% for BTC) does not tell us whether the low was final.
What a careful desk would check. Realised volatility, the size of the swings that actually happened scaled to a yearly figure, reached 318.1% for BTC. A position sized for an ordinary week can be several times too large in a week like this. A desk would compare its stop distances and margin buffers with the 18.21% hourly move rather than with the average week, and ask whether its exits could have been filled inside that hour at all.
Funding. BTC perpetual funding averaged -0.0265% per eight hours and touched -0.3%. A negative rate means holders of short positions were paying holders of long ones for part of the week.
What would change this reading
- If hourly moves of this size repeat in the following week, limits calibrated on the prior twelve weeks remain too loose.
- If BTC recovers to its weekly open of 8,034.76 while volume returns to normal, the week reads as a liquidity shock rather than a change of trend.
- If funding stays negative while price rises, short sellers are paying to keep losing positions, which is worth watching as a sign of a crowded side.
Terms
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- perpetual funding
- a regular payment between long and short holders of a perpetual futures contract that keeps its price close to the spot price