Kaiko Factsheet: November 23, 2020
This week in cryptocurrency markets:
- Bitcoin has gained more than $5,000 over the past 30 days, breaking $18k for the first time in nearly three years.
- Ethereum’s YTD returns are now +350% — nearly double that of Bitcoin’s — as it closed the week above $500 for the first time since July of 2018.
- November trading volumes are already higher than volumes for any of the previous six months.
- The quantity of ask orders on Bitcoin-Dollar order books nearly doubled this week as traders prepare to take profits.
- Spreads for Ethereum-Dollar pairs widened on all exchanges in response to rising volatility.
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Price Movements
A bull run is upon us. Cryptocurrency markets soared across the board this week in a momentous rise reminiscent of the 2017 bull run. This time around, the market exuberance is tied to more than just pure retail-driven sentiment, with the price rally driven by larger players such as PayPal, MicroStrategy, Square and Stone Ridge. Positive institutional news continued this week as Grayscale announced that their AUM broke $10B, making them the largest cryptocurrency hedge fund. Additionally, traditional wealth managers seem to finally be expanding into crypto in response to growing demand from high-end retail clients.
Bitcoin nears new ATH. Bitcoin tore through five key price levels over the past 30 days in one of its fastest climbs ever, rivaled only by the 2017 bull run and brief 2019 climb above $10k. Bitcoin closed the week above $18k for the first time since December of 2017, ending the week up a whopping 15% in its largest week-on-week growth YTD. Other Bitcoin metrics are also on the rise including market capitalization, active addresses, and open interest for CME futures, which topped $1 billion for the first time. On the other hand, the balance of Bitcoin on exchanges has dropped 18% YTD, indicating that there may be a supply crunch contributing to the current rally.
Ethereum surges past $500. Over the past month, ETH and altcoin price action mostly took a back seat to BTC’s price run, but that all changed this week. For the first time since July of 2018, ETH surged past the psychological price level of $500. ETH has become one of the best performing cryptoassets of the year, with YTD returns of +352%, more than double that of BTC. The Ethereum network has seen several recent positive catalysts to its current run, including the progression of the Ethereum 2.0 network upgrade and continued interest in decentralized finance.
Kaiko Research Insights
Our latest in-depth research pieces published to our blog.
1. An Analysis of Cryptocurrency Whale Trade Size and Direction: Trade data can reveal rich insights about an exchange’s user base. In this report, we explore the trade size, direction and count of transactions on 11 exchanges, with a focus on large “whale” trades.
2. Bitcoin Historical Volatility — Why the Calculation Methodology Matters: In this article, several methods for calculating historical volatility are reviewed and an important note of caution is drawn on the interpretation of sudden drops in volatility.
3. Why Cryptocurrency Exchange Infrastructure Matters: On March 12–13th, cryptomarkets experienced a nearly unprecedented market sell-off across all exchanges and trading assets. We look at ‘Trade Count,’ or the number of trades that occur over a time interval, to understand why so many exchanges struggled to keep up.
Trading Volume
November trading volume soars. Bitcoin-dollar monthly volumes are now higher than they were in the previous 5 months, and November isn’t even over yet. The 6-month high for daily volume peaked on November 18th, topping $1.5 billion on 8 top exchanges as Bitcoin tore through $18k. Volumes are now nearly double what they were over the summer as traders flock to take advantage of the bullish sentiment. Week-on-week, volumes are up 70%.
Ripple volumes skyrocket as price doubles. XRP went parabolic this week, gaining 65% in a turnaround for the embattled cryptocurrency, which seemed destined to trade sideways for eternity. Its surprising breakout caused a meteoric surge in trading volume with week-on-week XRP-dollar volumes up 480%. It is still unclear what caused XRP’s breakout beyond pure market sentiment on the tail of Bitcoin’s bull run.
Volatility and Correlations
Bitcoin as digital gold. Despite no consistent longterm correlation with gold, another round of “Bitcoin as Digital Gold” sentiment struck the market this week in response to comments by BlackRock’s CIO declaring that Bitcoin could take the place of gold in the long run. Bitcoin’s correlation with ETH and XRP continued to weaken this week, despite altcoin’s riding the tail of Bitcoin’s recent rally. Bitcoin’s correlation with equities also took a downturn as the stock market had dismal week-on-week returns, a stark contrast to Bitcoin’s +15%.
Volatility expected to rise further. Volatility is a lagging indicator, so the past week has not yet been fully absorbed by our 20-day volatility calculation. Yet, the price swings were apparent as Bitcoin, Ethereum, Ripple, and many other altcoins posted superb week-on-week returns. Traditional markets, on the other hand, have remained flat over the past few weeks despite positive vaccine news.
Bitcoin’s volatility influenced by price gains. Over the past 30 days, Bitcoin has closed the day up 21/30 times. The pullbacks have been slight, with most positive returns greater than 2%, while negative returns under 2%. Can the momentum keep up to new all time highs?
Order Book Liquidity
Ask depth rises with price of BTC. The chart above depicts the quantity of orders on both the bid and ask side of order books for BTC/USD trading pairs. We can observe that as the price of Bitcoin rose over the past week, the depth of orders on the ask side of the book nearly doubled. The rise in ask depth could be in response to increased buying pressure, which market makers are accommodating by increasing the quantity of asks on the book. Another explanation could be that traders are placing limit orders on the ask side in preparation for a pullback, where they would take profit should Bitcoin breach key price levels.
Ethereum volatility widens spreads. This week, Ethereum’s +25% price run caused spreads to widen for ETH-Dollar trading pairs on all exchanges analyzed. Market makers don’t want to be caught in a volatility swing so they will often widen spreads to account for the increased risk. Spreads typically narrow once prices stabilize, but they make the cost to trade more expensive in the meantime.
Any redistribution of charts appearing in this Factsheet must cite Kaiko as the sole provider and creator. This Factsheet was written by Clara Medalie, developed by Anastasia Melachrinos with help from the Kaiko team. This is not financial advice.
Altcoins Rally as Bitcoin Approaches Record High was originally published in Kaiko Data on Medium, where people are continuing the conversation by highlighting and responding to this story.