Kaiko Factsheet: November 30, 2020
This week in cryptocurrency markets:
- Bitcoin’s all time high varies significantly depending on the exchange, ranging from $18,240 to $21,163 across 10 USD trading pairs.
- A new 6-month high for Bitcoin-Dollar trade volume was reached this week, surpassing $2 billion in a day.
- Order book depth on the ask side of the book collapsed as traders bought the dip during Bitcoin’s sharp mid-week pullback.
- XRP volatility jumped above 200% as prices surged to multi-year highs.
Want to receive this analysis every Monday morning? Subscribe here.
Price Movements
The ATH that wasn’t. Early last week, crypto Twitter and market analysts went aflame with predictions that Bitcoin’s next All Time High (ATH) was imminent. Those hopes came to an abrupt end as Bitcoin crashed 15% in 24 hours. Over the weekend, the crypto-asset rebounded with force, re-igniting ATH hysteria. Why is an ATH so important for Bitcoin? What does an ATH even mean? Almost every ATH is quoted in USD, and popular lore cites it as greater than $20k. But the reality is that Bitcoin never reached $20k on most exchanges. In fact, only three exchanges in Kaiko’s collection recorded an ATH greater than $20k. The price of Bitcoin is often subjective, rather than objective, because it requires a pricing methodology that varies depending on the data provider. Ultimately, there is no definitive ATH — rather, there are a range of ATHs dependent on the time interval, exchanges, and aggregation methodology used in the calculation.
To show why determining a single ATH for Bitcoin is difficult, we charted the daily volume weighted average price (VWAP) on 10 exchanges (several of which have since gone out of business or de-listed their BTC-USD trading pair). We can observe that $20k was only reached on CEX.IO, but that the price seems to be well out of range from where it was trading on other exchanges. This doesn’t mean that the price is invalid — rather, it indicates that this particular Bitcoin market was inefficient and traded at a premium, which doesn’t necessarily matter when determining an ATH.
Let’s zoom in a bit. When looking at the hourly VWAP on these same exchanges, we can observe that there are now two exchanges where Bitcoin traded above $20k — CEX.IO and Liquid (at the time known as Quoine). We can also observe that Bitcoin briefly traded above $21k on CEX.IO, nearly $1,000 greater than the commonly cited ATH of $20k. One could argue that Bitcoin only traded above $21k on this one exchange, so it doesn’t count as an ATH. But that same argument could be made for $20k, a price level never reached on the majority of exchanges.
Finally, when looking at minute VWAP, we can observe that Bitcoin traded above $20k on a third exchange for a couple of minutes — Gatecoin. It reached $19,999 on Gemini, but ultimately never breached $20k (we took a look at the tick-by-tick trade data just to be sure). By showing the price of Bitcoin at different volume-weighted time aggregations, we can observe how Bitcoin’s ATH changes depending on the time interval of the data used in the calculation. This is significant because nearly every price display website uses daily aggregations for price, which would ultimately obfuscate Bitcoin’s actual ATH.
Bitcoin’s ATH is almost always quoted in USD, but when looking at other fiat currencies we can observe that during the peak of the 2017 bull run, Bitcoin traded higher against the Korean Won, Hong Kong Dollar, and Japanese Yen, compared with the US Dollar. We rebase Bitcoin-Fiat price data to September 1st, 2017 (just before the bull run began), which allows us to fairly compare different fiat trading pairs. Before the peak of the bull run, markets were relatively efficient shown by the near equal rebased price across fiat trading pairs in early November. However, as bullish hysteria grew, fiat prices began to diverge, most notably the Korean Won which Bitcoin traded against at a steep premium, famously dubbed the “Kimchi Premium” back in 2017.
So what is Bitcoin’s ATH? The crypto community puts a lot of weight on “Bitcoin breaching new ATH”, but there is still no consensus as to what the ATH actually is. Ultimately, Bitcoin’s ATH depends on the granularity and source of data used in the aggregation. When Bitcoin finally does breach new “ATH’s” (this week? before EOY?), be sure to pay attention to the source and methodology of the price quoted.
Trading Volume
Volumes keep climbing. Bitcoin’s extreme price swings this week resulted in a 6-month high for aggregated daily trade volume on eight top exchanges, surpassing $2 billion traded in 24 hours. November volumes are up 124% compared with October as Bitcoin’s bull run continues with force. Last week, Coinbase’s trading app breached the top 100 most-downloaded apps on the Apple store, a sign that retail interest is growing.
Dai price fluctuation causes mass liquidations. In other Coinbase news, the price of DAI, Maker’ Dao’s dollar-pegged stablecoin, briefly jumped 30% on Coinbase, resulting in $89 million in liquidations at DeFi protocol Compoud. Compound uses the price of DAI-USDC from Coinbase as an external input to its protocol, which is why a change in the price triggered mass liquidations for those who suddenly found themselves under-collateralized. The price jump could imply some type of manipulation because Compound’s price oracle sources data directly from Coinbase. Leading up to the price fluctuation, we can observe a slight increase in the buy volume for the DAI-USDC pair. However, the spike in volume is not significant enough to indicate an abnormality and more attention would have to be made to the pair’s order book.
Order Book Liquidity
Price crash demolishes ask depth. Price volatility has a significant impact on order book liquidity. On November 26th, the price of Bitcoin crashed hard, resulting in a complete decimation of depth on the ask side of the order book. Market makers don’t want to get caught on the wrong side of a price swing, and they will frequently pull orders from the book to as a way to manage risk. Another contributing factor to the decimation of ask depth could be “buy the dip” traders, who set automatic market buy orders to quickly pick up Bitcoin as its price falls. Bid depth was unaffected by the price crash.
Spreads double during Bitcoin crash. Order book data shows Bitcoin’s volatility extended beyond just its price, as the bid-ask spread on all exchanges more than doubled. Over the weekend, spreads narrowed slightly, but market makers are still on edge in preparation for more volatility.
Volatility and Correlations
XRP volatility is through the roof. The price of Ripple’s XRP token more than doubled last week in one of the largest altcoin price jumps of the year. The price surge occurred amidst an impending XRP airdrop, sparking speculation over the cause of the buying pressure. While the past month’s bull run has led to massive gains (and sharp pullbacks) for BTC and ETH, volatility has mostly stayed flat. This is because the price gains have been relatively stable day-by-day, apart from last week’s sharp correction. In traditional markets, Gold hit a 4-month low while equities rallied.
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.
What is Bitcoin’s All Time High? was originally published in Kaiko Data on Medium, where people are continuing the conversation by highlighting and responding to this story.