Week of 4 May 2020: Bitcoin touches 10,067 then closes down 1.93%; Ether falls 10.64%
When a market that has risen for four straight weeks first breaks higher and then collapses into the bottom of its own range, what does the shape of that week reveal about the rallies that preceded it?
BTC moved from 8,894.15 to 8,722.77, a 1.93% fall, after touching 10,067.00 on Thursday; ETH fell from 209.86 to 187.54 (-10.64%). Both assets set their weekly low at 00:00 UTC on Sunday 10 May, in the same hour as their largest hourly drop. BTC volume was 1.54 times its prior 12-week average.
What the data shows. BTC gained 15.61% in the prior week and 8.03% the week before that, then opened this week at 8,894.15 and climbed to 10,067.00 in the late UTC hours of Thursday 7 May, a daily gain of 9.22%. From there the week reversed: the low of 8,117.00 arrived at 00:00 UTC on Sunday 10 May, in the same hour as the week's largest hourly move (-8.76%) and the worst day (-8.56%). The full range from low to high was 24.02%. ETH followed the same path but fell further: high 216.61 on Friday 8 May, low 179.59 on Sunday, worst day -10.73%. Both closed in the lower third of their weekly range (BTC's close sat 31.1% up the range, ETH's 21.5%). Realised volatility, the size of the swings that actually happened scaled to a yearly figure, was 100.1% for BTC and 103.7% for ETH.
What it does not show. The candles do not say why the Thursday high failed or who sold into Sunday. Volume was above the prior twelve-week average for BTC (1.54 times) but only marginally so for ETH (1.05 times), and neither figure identifies buyers or sellers. The weekly returns still sit above the 32nd percentile for BTC and the 16th for ETH across 116 weeks of history, so this was a down week, not an extreme one.
What a careful desk would check. BTC closed 37.52% below its 52-week high and ETH 47.59% below, so both remain deep in a decline even after four rising weeks. The distance from open to weekly high was 13.19% for BTC and 3.22% for ETH, so much of the week's upside was surrendered inside days. A desk would test whether its risk limits, set during four rising weeks, would have absorbed an 8.76% hourly move arriving in the first hour of Sunday 10 May.
Ether against Bitcoin. The two assets moved closely (hourly correlation 0.87), but ETH's weekly loss exceeded BTC's by 8.71 percentage points and the ETH/BTC ratio fell 8.88%. In the prior four weeks both assets rose every week (ETH: 11.14%, 13.54%, 9.64%, 6.32%; BTC: 1.93%, 3.14%, 8.03%, 15.61%), with ETH ahead in three of them; this week the relative lead reversed outright.
What would change this reading
- If BTC trades back above its weekly high of 10,067.00 in a later week, the Sunday low reads as a reversal within a still-rising market rather than the start of a new decline.
- If a later week closes below 8,117.00, the Thursday peak of 10,067.00 becomes the reference point for a topping pattern rather than a failed breakout.
- If the ETH/BTC ratio keeps falling after an 8.88% weekly drop, the pattern of Ether leading has turned, which changes which hedge carries the exposure.
- If funding, which averaged 0.0233% per eight hours for BTC while price fell, turns negative, long positions were paying to hold through the decline and the crowding picture shifts.
Terms
- close location
- where the week's closing price sits between its low and high; a low figure means it closed near the bottom of the range
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- percentile
- the share of past weeks with a lower value; the 32nd percentile means 32% of the 116 prior weeks were lower