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Weekly brief · week of 7 November 2022

Week of 7 November 2022: a 21.89% fall in a market already 75% below its high

What does a sharp weekly fall mean when the market is already deep in a decline, and how should it change the way a trader reads the next rebound?

BTC fell from 20,905.58 to 16,329.85 (-21.89%) and ETH from 1,568.25 to 1,221.49 (-22.11%). Both lows came at 23:00 UTC on Wednesday 9 November. At the week's close BTC was 75.25% below its 52-week high.

What the data shows. Most of the fall happened on Wednesday 9 November, when BTC lost 14.14% and ETH 17.38% within the day. Thursday then produced the best day of the week (BTC +10.54%, ETH +17.82%) and the largest hourly move, +5.87% for BTC in the hour starting 13:00 UTC. The two assets moved closely (hourly correlation 0.91) and the ETH/BTC ratio barely changed (-0.29%), so this was a broad move rather than one asset leaving the other behind. BTC dollar volume was 1.53 times its prior twelve-week average.

What it does not show. The candles do not say what caused the selling. They do show that the four weeks before were calm for BTC, with weekly returns between -0.91% and 5.4%, so the fall arrived after a quiet stretch rather than at the end of a visible slide.

What a careful desk would check. A drawdown is the fall from a previous peak. When a market is already 75.25% below its high, a further 21.89% fall removes a large share of what is left, and a +10.54% day can still sit inside a downtrend. A desk would read the Thursday rebound separately from the week's direction and ask how much of it came in a few hours.

Funding. BTC funding averaged -0.0133% per eight hours, so short positions were paying long ones on average.

What would change this reading

  • If BTC closes a later week back above this week's open of 20,905.58, the Wednesday fall reads as a shock that was absorbed rather than a new leg down.
  • If the Thursday rebound fades while funding turns more negative, the rebound looks more like shorts closing than new buying.
  • If ETH starts falling faster than BTC, the broad move has become a relative one, which changes which hedge matters.

Terms

drawdown
the fall from a previous peak, as a percentage of that peak
hourly correlation
how closely two prices moved together hour by hour, from -1 to 1
Market case · BTC, week of 7 November 2022A 10.54% rebound day inside a 21.89% losing week tests a loss-limit ruleShould a fund that cut its BTC exposure at its loss limit buy back on Thursday's rebound, or wait for the week to close before resetting its limit?Market case · ETH, week of 7 November 2022Quoting both sides through a 49.79% range without carrying the week's inventoryShould the desk widen its ETH spreads and halve posted size to keep inventory small, or quote tighter at full size to capture volume 1.77 times the prior 12-week average?Concept · example: BTC, week of 7 November 2022DrawdownHow far below its last peak is a market, and why does that number change how a fall should be read?

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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