Week of 5 April 2021: Bitcoin and Ether gain about 3% while longs pay funding
When two assets rise towards their 52-week highs on below-average volume and positive funding, what does the week say about the cost of holding long positions, and what can it not say?
BTC rose from 58,202.01 to 60,002.43 (+3.09%) and ETH from 2,075.70 to 2,151.36 (+3.65%). Both fell on Wednesday 7 April, then set weekly highs at 05:00 UTC on Saturday 10 April. Funding stayed positive all week and volume ran below the prior twelve-week average.
What the data shows. BTC gained 3.09% and ETH 3.65%, so ETH outperformed by 0.56 percentage points and the ETH/BTC ratio rose 0.54%. The path was not straight. Wednesday 7 April was the worst day for both (BTC -3.51%, ETH -7.04%), with ETH hitting its low of 1,930.01 at 12:00 UTC and BTC its low of 55,473.00 seven hours later. Thursday 8 April was the best day (BTC +3.80%, ETH +5.96%). Both weekly highs arrived in the same hour, 05:00 UTC on Saturday 10 April: 61,500.00 for BTC and 2,200.00 for ETH. At the close BTC sat 2.67% below its 52-week high and ETH 1.82% below its own. Both closes were in the upper part of their weekly ranges (close location 75.2% for BTC, 82.0% for ETH). Activity was quiet: BTC dollar volume of 21.96 billion was 0.82 times its prior twelve-week average, ETH's 8.79 billion just 0.71 times. The weekly returns ranked at the 59th and 57th percentiles of 164 recorded weeks.
What it does not show. Prices record where the market went, not why. The Wednesday dip and the Saturday high sit in the same data with nothing identifying who was buying or selling. Below-average volume does not prove the advance was poorly supported, and positive funding does not reveal how large the long positions were.
What a careful desk would check. BTC funding averaged 0.0599% per eight hours and never turned negative (minimum 0.013%, maximum 0.1486%), so a leveraged long paid a running carry throughout the week before any price move. ETH's average was higher at 0.07%, peaking at 0.2097%. Realised volatility was 50.1% for BTC and 63.3% for ETH, so the funding cost is small next to the swings but not negligible over a multi-week hold. A desk would test whether that carry is counted in its expected return for positions held through the week.
Ether against Bitcoin. Hourly correlation was 0.84, so the two assets moved together but not in lockstep. ETH's deeper Wednesday fall (-7.04% versus -3.51%) and stronger Thursday rebound (+5.96% versus +3.80%) show where the looseness sat in the week.
What would change this reading
- If funding stays positive while BTC stalls below its Saturday high of 61,500.00, longs keep paying 0.0599% per eight hours for a position that is no longer rising.
- If BTC trades back below its Wednesday low of 55,473.00, the mid-week dip was a floor under test rather than a pause.
- If dollar volume returns towards its twelve-week average while price holds near the highs, the thin participation of this week would read differently.
- If the ETH/BTC ratio stops rising after a 0.54% weekly gain, ETH's outperformance was a one-week event rather than a shift.
Terms
- funding rate
- the periodic payment between long and short holders of a perpetual futures contract; positive means longs pay shorts
- close location
- where the week's close sits between its low and high, as a percentage; a high figure means the close was near the top of the range
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage