Week of 18 May 2020: Bitcoin falls 9.92% while Ether loses only 3.44%, lifting the ratio 7.2%
When two closely correlated assets fall by very different amounts in one week, what does the gap between them tell us, and what does it leave unanswered?
BTC fell from 9,681.11 to 8,720.34 (-9.92%) while ETH fell from 207.02 to 199.90 (-3.44%), so the ETH/BTC ratio rose 7.2%. Both assets closed in the lower third of their weekly ranges, with BTC's low arriving in the final hour. Dollar volume for both ran below their prior 12-week averages.
What the data shows. BTC set its weekly high of 9,950.00 at 01:00 UTC on Monday 18 May and its weekly low of 8,700.00 at 23:00 UTC on Sunday 24 May; the recorded range across those two prices was 14.37%. Its worst day was Sunday (-5.00%) and its largest hourly move -3.59%, in the hour starting 15:00 UTC on Wednesday 20 May. ETH peaked early too (217.07 at 04:00 UTC Monday) but made its low of 191.71 three days earlier, at 18:00 UTC on Thursday 21 May, then rebounded (+3.32% in the next hour and +4.35% on Friday). Hourly correlation between the two was 0.90, yet ETH outperformed BTC by 6.48 percentage points, so the ETH/BTC ratio gained 7.2%. BTC's weekly return ranked at the 17th percentile of the 118 weeks of history, following three up weeks and one down week. Both assets sat well below their 52-week highs: BTC by 37.54%, ETH by 44.14%.
What it does not show. The data cannot explain why ETH fell so much less. Correlation of 0.90 describes co-movement, not equal magnitude, and the ratio shift could reflect ETH strength, BTC weakness, or both. There is no data here on who traded, on positioning, or on open interest, so any crowding argument stays untested. The Sunday low in the final hour does not establish a floor.
What a careful desk would check. Realised volatility, the size of the actual hourly swings scaled to a yearly figure, was similar for both (66.1% for BTC, 67.5% for ETH), which suggests the divergence came from direction and persistence rather than from ETH being calmer. Volume was modest for both — BTC at 0.94 times and ETH at 0.85 times their prior 12-week averages — which argues against reading the week as a heavy liquidation. A desk would test whether the ratio move persists without a volume expansion.
Funding. Perpetual funding, the periodic payment between long and short holders, stayed close to neutral: BTC averaged 0.0051% per eight hours (range -0.009% to 0.01%) and ETH 0.0097% (range 0.0035% to 0.01%). Slightly positive funding means longs paid shorts on average, but at levels that add little cost to a position held for days.
What would change this reading
- If BTC closes a later week above its weekly open of 9,681.11, this week reads as a pullback within the prior month's gains rather than the start of a decline.
- If the ETH/BTC ratio gives back part of its 7.2% rise while hourly correlation stays near 0.90, the divergence was temporary rather than a change in relative trend.
- If dollar volume rises above the prior 12-week averages while BTC trades below 8,700.00, the quiet character of this week has changed and the Sunday low deserves a second look.
- If funding moves materially away from neutral in either direction, the cost of holding a side becomes a factor it was not this week.
Terms
- ETH/BTC ratio
- the price of one Ether expressed in Bitcoin; it rises when Ether outperforms Bitcoin
- funding rate
- the periodic payment between long and short holders of a perpetual futures contract; positive means longs pay shorts
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage