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Weekly brief · week of 17 January 2022

Week of 17 January 2022: Bitcoin loses 15.85% and Ether 24.14% on below-average volume

When both assets fall hard on lighter-than-usual trading volume, what can this week say about direction, and what can it not say about cause or intent?

BTC fell from 43,071.66 to 36,244.55 (-15.85%) and ETH from 3,346.89 to 2,539.01 (-24.14%). Friday 21 January alone took 10.41% off BTC and 14.44% off ETH. Both returns ranked at the 4th percentile of the 205 weeks on record, and both closed in the lower third of their weekly ranges.

What the data shows. BTC opened just below its weekly high (43,071.66 open, 1.01% below the 43,505.00 high on Thursday 20 January at 16:00 UTC) and then gave way. Friday 21 January was the worst day for both assets: BTC -10.41%, ETH -14.44%. The largest hourly move of the week landed in the same hour for both, starting 21:00 UTC on Friday (-4.36% BTC, -4.97% ETH). Both weekly lows arrived together at 10:00 UTC on Saturday 22 January: 34,008.00 for BTC and 2,300.00 for ETH. Sunday 23 January produced the best day of the week (+3.34% BTC, +5.26% ETH), but the closes sat at 23.6% and 22.6% of their respective weekly ranges, in the lower third. Dollar volume was 13.69 billion for BTC and 10.94 billion for ETH, or 0.90 and 0.93 times their prior twelve-week averages. BTC was 47.19% below its 52-week high at the close, ETH 47.61%.

What it does not show. Volume below the twelve-week average tells us the fall did not come with heavier-than-usual turnover. It does not tell us whether sellers were few, unwilling to pay up, or simply unopposed; nor who they were. The four prior weeks were mixed for BTC (8.77%, -6.87%, -11.47%, 2.88%), two up and two down, so this data alone does not place where the decline began. Nothing in this data says what followed.

What a careful desk would check. Realised volatility, the size of the swings that actually happened scaled to a yearly figure, reached 83.0% for BTC and 115.0% for ETH. A position sized for a calmer week can be several times too large here. The largest hourly moves of -4.36% and -4.97% in a single late-UTC hour would test stops set on wider prior ranges.

Ether against Bitcoin. Hourly correlation was 0.94, very close. But ETH fell 8.29 percentage points further, so the ETH/BTC ratio dropped 9.85%. Both returns sat at the 4th percentile of 205 weeks, so this was a shared move with one leg falling harder rather than a story about one asset alone.

What would change this reading

  • If a later week trades below Saturday's lows of 34,008.00 for BTC or 2,300.00 for ETH, the weekend low reads as a waypoint rather than a floor.
  • If volume rises well above the prior twelve-week average while price recovers towards the weekly opens of 43,071.66 and 3,346.89, the week reads more like a liquidity shock than a settled trend.
  • If the ETH/BTC ratio keeps falling after a 9.85% weekly drop, the two assets are no longer moving as one, and hedges sized on the 0.94 correlation become less reliable.

Terms

realised volatility
how much the price actually swung over a period, expressed as a yearly percentage
percentile
the share of past weeks with a lower value; the 4th percentile means almost all of the 205 recorded weeks were less negative
close location
where the weekly close fell between the week's low and high; 23.6% means near the bottom of the range
Market case · BTC, week of 17 January 2022A -15.85% week at the 4th percentile asks whether a signal failed or was tested outside its regimeShould the research team score this week as evidence that the signal failed, or reclassify it as an out-of-regime week and keep the signal at reduced size pending a test in ordinary conditions?Market case · ETH, week of 17 January 2022A hedged ETH position earning 0.0043% per eight hours through a 24.14% weekly fallShould a basis trader keep a full-size spot-long, perpetual-short ETH position earning near-zero funding through a 115% volatility week, or cut it until carry can pay for the margin it consumes?Concept · example: BTC, week of 17 January 2022Panic sellingWhat does it mean when people sell mainly to make a painful feeling stop, not because of a plan?Concept · example: ETH, week of 17 January 2022Value at riskWhat loss level is a market unlikely to exceed, and how does one very bad week change that estimate?

Research notes on real market weeks, not investment advice. Sources: Binance spot BTCUSDT and ETHUSDT 1-hour candles and USD-M perpetual funding rates; weekly figures computed by WSTiger.

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