Week of 12 July 2021: BTC -7.24% and ETH -11.63% on below-average volume
When both assets fall for a fourth week in five but trading volume is well below its recent average, is this a market being sold or a market being ignored?
BTC fell from 34,259.00 to 31,778.56 (-7.24%) and ETH from 2,140.54 to 1,891.64 (-11.63%). Both closed in the lower third of their weekly ranges. Dollar volume was 0.37 times BTC's and 0.36 times ETH's prior twelve-week average, and BTC's weekly return ranked in the 17th percentile of 178 weeks.
What the data shows. Both assets set their weekly highs at the same hour, 04:00 UTC on Monday 12 July (BTC 34,678.43, ETH 2,167.83), and then drifted lower for most of the week. BTC reached its low of 31,020.00 at 11:00 UTC on Friday 16 July; ETH reached its low of 1,844.45 a day later, at 11:00 UTC on Saturday 17 July. Weekly ranges were 11.79% for BTC and 17.53% for ETH. The largest hourly move was small in both cases: -2.20% for BTC in the hour starting 03:00 UTC on Wednesday 14 July, and +3.72% for ETH in the hour starting 00:00 UTC on Sunday 18 July. Both closed in the lower third of their range (BTC at the 20.7th percentile of the week's range, ETH at the 14.6th), which describes where price settled but not where it goes next. Three of the prior four weeks were also down, and at the close BTC stood 50.79% and ETH 56.34% below their 52-week highs.
What it does not show. Volume was the quietest signal of the week: BTC's $9.89 billion and ETH's $7.95 billion were 0.37 and 0.36 times their prior twelve-week averages. Light volume makes it impossible to tell whether the decline reflected active distribution, an absence of buyers, or both. The data also cannot identify who was trading, whether any selling was forced, or what came after Sunday's close.
What a careful desk would check. Realised volatility (the size of the swings that actually happened, annualised) was 52.6% for BTC and 80.7% for ETH, so the week's fall came without violent hourly repricing. A desk would test whether its position sizing assumed the higher turnover of recent weeks, since exits into a market trading at roughly a third of that volume may fill worse than assumed, and would treat the low close location as an unresolved rather than a resolved week.
Ether against Bitcoin. ETH fell 4.39 percentage points more than BTC, and the ETH/BTC ratio dropped 4.73%, on a close hourly correlation of 0.85: the assets moved together, but ETH fell further. Funding (the periodic payment between long and short holders of perpetual futures) was near flat for BTC, averaging 0.0032% per eight hours within a range of -0.0118% to 0.01%, and slightly positive for ETH at 0.0083%, so neither side was paying a notable carry to hold position.
What would change this reading
- If BTC volume returns towards its prior twelve-week average while price holds above 31,020.00, the week reads as a decline that attracted participation and held.
- If BTC trades back above its weekly open of 34,259.00, the fourth down week in five is undone and the drift reverses.
- If ETH keeps falling faster than BTC and the ratio drops further below its -4.73% move, the relative weakness is becoming the story rather than the shared decline.
- If BTC funding moves towards its weekly low of -0.0118% and stays there, short positions are paying longs and the crowded side has shifted.
Terms
- realised volatility
- how much the price actually swung over a period, expressed as an annualised percentage
- close location
- where the weekly close sits between the week's low and high, as a percentage
- perpetual funding
- a regular payment between long and short holders of a perpetual futures contract that keeps its price close to the spot price