Week of 21 September 2020: mid-week drop, close near range top on light volume
When a market falls hard mid-week but closes near the top of its range, what does that pattern say about the balance between selling and buying, and what can it not say?
BTC fell from 10,920.28 to 10,774.25 (-1.34%) and ETH from 371.04 to 357.49 (-3.65%). Both hit their low on Wednesday 23 September, then recovered most of the drop and closed in the upper third of their weekly ranges. Volume ran below the prior 12-week average for both.
What the data shows. Both markets opened the week close to their highs: BTC's high of 10,988.86 came at 04:00 UTC on Monday 21 September, 0.63% above the open, and ETH's 376.80 came at 00:00 UTC the same day, 1.55% above its open. Both then sold off for two days, bottoming together at 20:00 UTC on Wednesday 23 September: BTC at 10,136.82, ETH at 313.29. The largest hourly moves came earlier, on Monday: -1.65% for BTC in the hour starting 14:00 UTC, -2.48% for ETH at 09:00 UTC. The recovery was led by Thursday 24 September, the best day for both (BTC +4.83%, ETH +8.81%), after Monday was the worst (BTC -4.61%, ETH -8.27%). Both closed in the upper third of their weekly range (BTC 74.8%, ETH 69.6%). Realised volatility, the size of the swings that actually happened scaled to a yearly figure, was 35.1% for BTC and 69.7% for ETH.
What it does not show. The candles show a drop and a partial recovery. They do not show what caused either, who was selling on Monday and Wednesday, or who bought on Thursday. A close in the upper third of the range is a fact about where the week ended, not evidence that the decline is over. Both assets remain below their 52-week highs: BTC by 13.26%, ETH by 25.95%. The prior four weeks were mixed for both (three up, one down, including -12.42% for BTC and -17.75% for ETH).
What a careful desk would check. Volume was light: BTC at 3.5 billion dollars, 0.82 times its prior twelve-week average, and ETH at 2.1 billion, 0.92 times. A recovery on below-average volume is a weaker signal than one on heavy volume, and a desk would ask whether the Thursday gain held in later weeks. It would also note that ETH moved much further than BTC across the week (range 20.27% versus 8.41%), so position sizes set from BTC volatility alone would be too large for ETH.
Funding. Perpetual funding, the periodic payment between long and short holders that keeps contract prices near spot, averaged a barely positive 0.0037% per eight hours for BTC and 0.005% for ETH, with maxima of 0.01% and minima of -0.0232% and -0.0228%. Rates crossed between positive and negative during the week, so longs and shorts each paid at times rather than one side paying continuously.
What would change this reading
- If BTC holds above its weekly low of 10,136.82 in later weeks, the Wednesday bottom reads as a level the market defended once, not a trend.
- If the Thursday recovery fades while volume stays below its prior twelve-week average, the bounce looks thin rather than decisive.
- If ETH continues to fall faster than BTC, the ETH/BTC ratio change of -2.35% marks the start of a relative shift rather than a one-week divergence.
- If funding turns clearly negative while price stays near the weekly close of 10,774.25, short positioning is building into a market that has already recovered.
Terms
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- close location
- where the week's closing price sits between the week's low and high; at the high end means it closed at the week's high
- perpetual funding
- a regular payment between long and short holders of a perpetual futures contract that keeps its price close to the spot price