How Bitcoin Trading is Different in 2017 vs 2019?

This is also Why Alts Season has not Started yet?

We are in September 2019 now, after a descent ride of BTC back above $10K. This reminds people of the crazy roller coaster ride in second half of 2017. As BTC dominance is over 70% now, people kept asking and crying for the Alts Season. However, most major coins are still on the ground without signs of “taking off” to the Moon.

Why? Why? Why…….?

In order to answer the question, we did an comparison analysis of BTC market price and volume in 2017 and 2019 with an attempt find out how the market conditions have changed.

Data Methodology

We adopted the K-Means algorithm, set the # of clusters to 7 and the max iterations as 1000. Also, we examined both the whole data and segments of the data (divided into 3 segments).

Regarding data, we have used 1-Hour candle data of BTC-USDT aggregated over the market from 04/2017– 09/2019.

Time Period: 04/01/2017–09/08/2019

Using trading pairs of return and volume, different clusters shows different combinations. For example, positive return with low volume (<10K BTC), small return with high volume (>50KBTC).

This seems not very informative however if we track the returns using clustered color on timeline, it will be more interesting. There is a clear cut at 07/2018. Before 07/2018, most returns are red, blue, yellow and purple, which represents returns with low volumes (<10K BTC). After 07/2018, most are green, black and light blue, which imply that the price change is backed up by much more trading volume. (high volume might be also contributed by inflated trading volume from new exchanges.) A hypothesis is that institutional investors start to take over control of BTC-USDT market after 07/2018.

• before 07/2018 — Trading volume is below 10K BTC usually.
• after 07/2018 — Trading volume increased significantly

Segment 1: 04/01/2017–12/18/2017

Trading volume does not contribute much in the clustering and there is no clear pattern to draw from the following two charts.

Segment 2: 12/19/2017–01/31/2019

The clustering is similar to the chart over the total sample. It also confirms the earlier conclusion:

• before 07/2018 — Trading volume is below 10K BTC usually.
• after 07/2018 — Trading volume increased significantly

Segment 3: 02/01/2019–09/08/2019

Segment 3 is quite different from Segment 1. As the left and right tails disappeared: it takes a much larger volume to move the BTC-USDT market in 2019 compared to that in 2017. The cone shape of scatter plot of return vs. trading volume implies that it is no longer possible to move BTC-USDT market with <10K BTC trading volume.

Limitations of K-Mean Analysis

As the clusters are different across different time windows, it may be hard for interpretation and prediction of future market.

Conditions for $ALTS Season to Kick Off?

BTC price has been around $10K for the past couple of weeks and everybody is crying for $ALTS season. To kick off $ALTS season, the following conditions need to be met.

1. Stable Bitcoin price.

2. $ALTS price increases fast when market mood is good.

3. $ALTS price resists to decrease with Bitcoin price.

4. Bitcoin price dominance is over 70%.

As we speak today, while BTC-USDT still fluctuates around 10K, major coins have started to climb 5% with various project news, including $DASH listed on Coinbase Pro, EOS upgrade and ETH upgrade, etc.

Conditions #2, 3, 4 have been confirmed by recent market movements while #1 is still in confirmation. Our conclusion is that

$ALTS Season might be right around the corner ~!

GET READY~!

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