I wanted to take a closer look at the recent market volatility, using a combination of charts and my bitmex data collection (for more details on using the data click here), to see what insights we may uncover from this latest round of selling and if it tells us anything about possible future movements.
In part 1 here, I will mostly be looking at charts. (Let’s hope I can finish before we move another 10–15% as happened on Saturday morning, and have to insert all new charts! :-} )
In part 2, I will focus more on using my bitmex data spreadsheet to analyze the volatility.
As I had pointed out multiple times over the course of this recent 68 day sideways range: the longer a spring coils, the more violent the resulting ‘spring’ will be.
As we can see above, prices have dropped roughly 45% in just the last 2 weeks or so since we broke below the 6k floor.
Above are weekly charts for Bitmex, Binance, Bitfinex, and Coinbase since March or so. The volume portion of these charts is what stands out to me. As one would expect, it is up big-time on this move downwards, but what catches my attention is that Coinbase seems to have the biggest jump in volume, relative to its own average volume trends.
Of course 200k btc’s traded in a week between 4–6k price is half as much $USD being used to trade those same 200k btc’s at 8–12k price.
To me that suggests that folks may be capitulating and cashing out. If we zoom in on the charts, however, and look at volume on lower time-frames, I am actually not seeing the explosion in volume that one would expect with the massive % moves in price. (More on that in part 2.)
the Boredom Index
As part of my bitmex data collection, one of the things that I look at is the intervals in between seeing instances of an hourly range of 2% range or greater. (range not change)
This shows the instances of longest intervals in between seeing an hourly range of > 2% going back to April 1st. The longest gap was 340 hours that began on Sunday October 15th, and ended a little over 2 weeks later. There are 7 other instances of intervals over 100 hours. All of those have come somewhat recently over the last couple of months as we saw a large decrease in volatility and volume.
The ‘boredom index’ is a visual representation of those intervals:
As the interval increases since the last instance of an hourly range greater than 2%, the boredom index goes up. Once we have an hourly range over 2%, it resets back to 0, and the timer starts all over. The above chart shows the last 3 1/2 months of price action. The chart is book-ended by more ‘normal’ behaviors of volatility as seen by the mostly flat BI.
The image above shows my BI from about May until late August. I wanted to highlight this part of the chart to show what more ‘normalized’ volatility looks like. (‘normalized’, of course being relative in crypto). We typically see an hourly range of 2% or greater once or twice a day. In this image, we can see that the highest levels the BI reached was between 60–80. Many more shorter spikes. (Because remember each 2% instance sends this BI back to 0. So the more often we see those instances, naturally the more jagged ups and downs we will see on the BI)
Now in this image above, chart shows action for the 2 month period immediately prior to the drop from 6k. We can see the BI waves are much further spaced apart, which of course means the highs are higher in number and peak out at 200 and 300+.
If we refer back to the first chart, we can see that the latest period of range-bound action lasted 68 days before the selling began in earnest. In fact, we can see below, that we spent 117 out of 155 days in the same sideways chop. Only shortly punctuated twice by failed attempts to rally.
In the above image we can see that the BI went flat-line from that 150+ hour gap and has barely moved since. In addition, above the BI, that shows volume on a 72-hour (3 day) rolling average. You can see the selling has been in 3 main waves. The volume on 2nd wave down was higher than first wave. But volume on the 3rd and most recent wave down, volume was lower than prior wave. Perhaps sellers running out of steam?
As I wrap up part 1, one thing is for sure: this volatility offers fabulous scalping opportunities if you can find yourself on the right side of the trade. We are seeing 2% hourly ranges more often than not over the last couple weeks.
In part 2, we will look more closely at my bitmex data spreadsheet to get a more numerical view of this volatility (as opposed to chart view)
We shall see if bitcoin stays relatively stable in the time it takes me to write up that 2nd part :)
Until then, stay safe & Happy Trading!
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