Week of 28 December 2020: Bitcoin gains 25.56% and Ether 42.79%, both at the 99th percentile
When two assets post their strongest weekly returns in nearly three years of history with only loose correlation between them, what does the data say about the move and what can it not say?
BTC rose from 26,281.54 to 33,000.05 (+25.56%) and ETH from 685.1 to 978.28 (+42.79%). Both weekly returns ranked at the 99th percentile of 150 weeks of history. Hourly correlation was loose at 0.48, and positive funding held all week for both.
What the data shows. Both assets set their weekly lows early in the UTC day: BTC's low of 25,880.0 came at 05:00 UTC on Tuesday 29 December, ETH's low of 681.04 in Monday's first hour. Both highs came on Sunday 3 January, but in different parts of the day: BTC's high of 34,778.11 at 07:00 UTC, early in the UTC day, and ETH's high of 1,011.07 at 23:00 UTC, late in the UTC day. Both closed near the top of their weekly ranges, BTC at 80% of the way up its range and ETH at 90.1%. Volume ran hot: BTC's dollar volume of 18.58 billion was 2.03 times its prior twelve-week average, ETH's 7.41 billion was 2.21 times. The prior four weeks were mostly up for both (three up, one down).
What it does not show. The data records price, volume and funding, not who was buying or why. The loose hourly correlation of 0.48 tells us the two did not move together hour for hour, but it does not tell us what separated them. A 99th-percentile week says only that 99% of the 150 prior weeks were smaller; it says nothing about what follows.
What a careful desk would check. Realised volatility reached 98.0% for BTC and 103.1% for ETH on a yearly basis, and BTC printed its largest hourly move of -7.15% in the hour starting 20:00 UTC on Saturday 2 January, inside a week that still closed up 25.56%. A desk would ask whether stops sized on calmer weeks would have survived that Saturday hour, and whether the week's 34.38% range for BTC leaves room for a pullback that stays inside it.
Funding. Funding was positive all week: BTC averaged 0.059% per eight hours with a high of 0.155%, ETH averaged 0.0697% with a high of 0.1715%. Longs were paying shorts throughout, a running cost on leveraged long positions that the price gain must outpace to stay profitable.
What would change this reading
- If a later week closes below BTC's weekly open of 26,281.54, this week reads as an extension that was fully retraced rather than a durable step up.
- If ETH's outperformance reverses, the ETH/BTC ratio change of 13.72% marks a peak rather than a trend.
- If funding holds near 0.0697% for ETH while price stops rising, longs keep paying for a position that is no longer gaining.
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; positive means longs pay shorts
- hourly correlation
- how closely two prices moved together hour by hour, from -1 to 1; 0.48 is a loose fit