Week of 18 November 2024: Both assets rise about 9% but only loosely together
When two assets rise nearly the same amount in a week yet barely move in step hour by hour, what does that divergence tell a desk about hedging and about how much is being traded?
BTC rose from 89,855.98 to 97,900.04 (+8.95%) and ETH from 3,075.99 to 3,361.20 (+9.27%). Hourly correlation between them was 0.48, labelled loose. Dollar volume ran 2.05 times (BTC) and 2.26 times (ETH) the prior twelve-week average.
What the data shows. Both assets moved up for the week, but on different schedules. BTC set its low of 89,376.90 at 13:00 UTC on Monday 18 November and its high of 99,588.01 at 19:00 UTC on Friday 22 November. ETH's low of 3,029.41 came later, on Wednesday 20 November, and its high of 3,497.51 arrived on Saturday 23 November, after BTC's best day had passed. Thursday 21 November was the best day for both (BTC +4.27%, ETH +9.31%). BTC closed at 83.5% of its weekly range and ETH at 70.9%, both in the upper third. BTC ended 1.38% below its 52-week high; ETH ended 17.37% below its own.
What it does not show. The two similar weekly returns are close-to-close totals; the paths that produced them differed, as the 0.48 hourly correlation and the 0.29% change in the ETH/BTC ratio show. The data does not establish why the returns matched. It carries no information about who was trading or why the timing diverged.
What a careful desk would check. A hedge sized on the assumption that ETH moves one-for-one with BTC would have been poorly matched this week, especially on Thursday, when ETH's largest hourly move (+4.36%) was nearly double BTC's largest of the week (+2.22%). Realised volatility, the size of the actual swings scaled to a yearly figure, was 49.6% for BTC and 69.7% for ETH, so the same position in ETH carried more risk per hour.
Funding. BTC perpetual funding averaged 0.0146% per eight hours (range 0.01% to 0.0365%) and ETH 0.0232% (range 0.01% to 0.0405%). Positive rates mean longs paid shorts throughout, at modest levels.
What would change this reading
- If BTC closes a later week above this week's high of 99,588.01, the proximity to the 52-week high resolves upward rather than stalling.
- If hourly correlation firms out of its loose reading while ETH's relative strength continues, hedges built on this week's loose relationship will need reweighting.
- If funding for either asset rises well above this week's averages while gains slow, the cost of holding longs increases on a position that is no longer rising.
- If a later week trades below BTC's Monday low of 89,376.90, the +16.86% and +11.80% prior weeks read as a stretched run rather than a steady trend.
Terms
- hourly correlation
- a measure of how closely two prices move together hour by hour; this week's reading was labelled loose
- realised volatility
- how much the price actually swung over a period, expressed as a yearly percentage
- funding rate
- the periodic payment between long and short holders of a perpetual futures contract; positive means longs pay shorts