Week of 3 January 2022: Bitcoin loses 11% and Ether 18% on light volume
When two assets fall for a full week and close near their lows on below-average volume, what does that combination reveal about the selling, and what does it leave open?
BTC fell from 47,286.18 to 41,864.62 (-11.47%) and ETH from 3,828.11 to 3,151.97 (-17.66%). BTC's return ranked in the bottom 11% and ETH's in the bottom 8% of 203 recorded weeks, yet dollar volume ran below the prior twelve-week average for both. ETH underperformed BTC by 6.19 percentage points.
What the data shows. The price drifted down from an early-week high to a Saturday low. BTC set its high of 47,570 on Monday 3 January at 12:00 UTC and did not print its low of 40,501 until Saturday 8 January at 18:00 UTC, a range of 17.45% from high to low. ETH followed the same shape: a high of 3,900.73 on Tuesday 4 January, then a low of 3,000.00 on Saturday. The worst single day for both was Wednesday 5 January (BTC -5.19%, ETH -6.46%), which also carried BTC's largest hourly move, -2.69% starting 19:00 UTC. Both closed in the lower third of their weekly ranges (BTC 19.3%, ETH 16.9%). The two assets moved closely hour by hour (correlation 0.90), but ETH fell further, taking the ETH/BTC ratio down 7.0%.
What it does not show. Volume argues against reading this as a capitulation. BTC dollar volume was 0.69 times and ETH 0.76 times their prior twelve-week averages, so less money changed hands than in a typical recent week. Light volume on a large decline is consistent with thin trading as much as with conviction, and price candles cannot separate the two. Nothing here identifies who was selling or whether the Saturday low held after the week closed.
What a careful desk would check. Realised volatility, the size of the swings that actually happened scaled to a yearly figure, was 61.5% for BTC and 81.5% for ETH. The four prior weeks had already alternated direction for BTC (1.33%, -6.74%, 8.77%, -6.87%), and both assets sat 39.0% and 34.97% below their 52-week highs. A desk would ask whether its risk limits reflect a market that is already in a decline, and whether the Saturday lows were tested in the following week.
Funding. BTC perpetual funding held at 0.01% per eight hours for the average, the maximum and the minimum, a flat positive reading. ETH averaged 0.0076% but ranged from 0.01% to -0.0072%. Positive funding means long positions were paying short ones, a small running cost rather than a crowded signal.
What would change this reading
- If a later week trades below Saturday's lows of 40,501 for BTC and 3,000.00 for ETH, this week reads as an early leg rather than a pause.
- If volume returns to its prior twelve-week average while prices recover, the light-volume decline looks like thin trading rather than sustained selling.
- If ETH keeps falling faster than BTC and the ratio drops further from its -7.0% weekly move, the pair is decoupling and hedges sized on the 0.90 correlation become unreliable.
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 that keeps its price close to the spot price; positive means longs pay shorts
- ETH/BTC ratio
- the price of one Ether expressed in Bitcoin, showing which of the two outperformed