Week of 10 August 2020: Ether gains 11% while Bitcoin adds 2% in the same direction
When two crypto assets rise in the same week but one gains nearly six times more than the other, what does the data show about relative strength, and what can it not explain about why the gap opened?
BTC rose 1.96% to 11,911.00 while ETH rose 11.14% to 433.62, a gap of 9.18 percentage points. Both closed in the upper third of their weekly ranges and both traded on volume above their prior 12-week averages. Funding stayed positive all week for both.
What the data shows. The two assets moved in the same direction but at very different speeds. BTC opened at 11,681.69, fell to a low of 11,125.00 on Tuesday 11 August, and recovered to close at 11,911.00, a range of 8.47%. ETH opened at 390.14, dipped to 365.85 on Wednesday 12 August, then rose to a high of 444.71 on Friday 14 August, closing at 433.62, a range of 21.56%. The ETH/BTC ratio, which measures one asset's price in terms of the other, gained 9.0%. Hourly correlation was 0.72, close but not locked together. Volume was above the prior 12-week average for both: 1.47 times for BTC and 2.07 times for ETH. ETH's return sat at the 82nd percentile of the 130 weeks of history, BTC's at the 55th.
What it does not show. Prices and volumes record what happened, not why. Nothing here identifies which kind of trading drove the divergence. The four prior weeks were mixed-then-strong for both assets (BTC -1.01%, 7.85%, 11.48%, 5.51%; ETH -1.5%, 30.06%, 19.74%, 4.75%), so three of the last four weeks had already pushed both higher before this week began. A close in the upper third of the range shows where the week ended relative to its extremes, not what follows.
What a careful desk would check. ETH's realised volatility, the size of the actual swings scaled to a yearly figure, was 68.2% against BTC's 44.0%, and its hourly move reached +4.09% in the hour starting 20:00 UTC on Thursday 13 August. A position sized on BTC alone would be materially small in ETH this week. A desk would also read the ETH/BTC ratio on its own rather than treating the two books as one, since a 9.0% ratio move can swamp a hedge built from past correlations.
Funding. BTC perpetual funding averaged 0.0277% per eight hours, with a high of 0.1319% and never below 0.01%. ETH funding averaged 0.0693%, more than twice BTC's, with a high of 0.1468%. A positive rate means long positions were paying short ones, so leveraged longs on both assets carried a running cost, heavier on ETH.
What would change this reading
- If the ETH/BTC ratio holds near this week's gain in later weeks, the divergence reads as a change in relative strength rather than a one-week rotation.
- If BTC trades back below its weekly low of 11,125.00, the recovery to 11,911.00 looks less like a stable base.
- If hourly correlation between the two assets falls below 0.72 while funding stays positive, hedges sized on the recent relationship will need revisiting.
- If ETH funding falls back towards BTC's 0.0277% average while the ratio keeps rising, the cost of holding the outperforming side is easing even as it stays crowded.
Terms
- ETH/BTC ratio
- the price of Ether measured in Bitcoin; it rises when Ether outperforms Bitcoin
- 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 82nd percentile means 82% of the 130 weeks were lower