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Historical bitcoin corrections / Logarithmic scale


JamesIG

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There was an interesting article I was reading the other day which plotted the bitcoin corrections over the last couple of years. Unfortunately I can't find it now, but thought I'd have a go at re-plotting the corrections. This is using the IG data, but there are additional corrections pre 2015 which I wasn't able to capture. With this in mind... 

 

  • If bitcoin were to come off it's all time highs, what level do you think the buyers would start to come back in at?
  • And further to this what methods are you using to estimate this?
  • Will bitcoin bounce back at all, or is this the end of the hype and the end of the bubble? 

(n.b. charts below may have their daily candlesticks hidden by the % change column) 

 

November 2015 ~40%

bitcoin Nov 15.png

 

July 2016 ~38% 

Bitcoin July 16.png

 

January 2017 ~34%

bitcoin Jan 17.png

 

July 2017 ~40%

Bitcoin Jul 17.png

 

September 2017 ~40%

Bitcoin September 17.png

 

November 2017 ~28%

Bitcoin Nov 17.png

 

In perspective...

2017-12-06 11_31_30-IG Trading Platform _ Spread Betting.png

 

Logarithmic charting: "A logarithmic scale is a nonlinear scale used when there is a large range of quantities." The most commonly used example of this in in charting earthquakes. Effectively you are looking at the % move rather than the points move, for example, if bitcoin went from $1 to $2 (back in the day) even though it's only gone up a dollar, in reality it has doubled or seen a 100% increase. 

 

We don't have a log charting functionality on IG charts however you can use the Coin Market Cap charts as shown below. Does this show a better chart to plot technical analysis on? 

 

Logscale.png

 

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Guest Savvyscot

Interesting post James...thanks for sharing. Im shorting (and losing) so i sure hope there is a big crash soon!! Taking into account bitcoin's dramatic surge in 2017 in the face of much criticism by big fish, i think many sceptics are now sitting up and taking notice...perhaps experiencing fomo. Given this, i predict buyers will flood in once there is fall in price. Driven by fomo. Bitcoin is too young and too important to die soon in my opinion. There are now bitcoin 'credit cards', talks of some major companies accepting btc payments, the mining network is huge, btc has integrated itself firmly into some areas of everyday life in some places. Too young to die yet. Bitcoin will be around for some time yet.

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Guest Savvyscot

Based on your experience of bitcoin and the helpful info shared by james, when do folk predict the next btc crash will occur? And of what magnitude?

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Guest Savvyscot

I'm afraid i already have two short trades sitting at 11600 and 12000 respectively. Big oops. So im just pumping my account with funds to keep the losses running. Its not over until the trade closes (positive self talk). Iv been lucky over last couple months with just guesswork really but i could have saved myself alot of grief from some chart watching.

 

I need to get to grips with how to use the ig charts in a meaningful way.

 

I sure hope btc doesnt keep going on to 20k without a correction. Im tempted to open a long bet to try to negate losses but i think that would be tying up too much cash in btc trades. Looks like iv just got to hold my nerve and ride this one out, hoping for a big correction soon.

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Guest fmradio05

My shorts have been wrecked since 12.1k and I liquidated the short and when I tried to long from 12.6 to now 13.6 I still cannot open an order! Come on it is a 1000 point increase, I would have recovered the loss if I was able to open the order at 12.6. IG seriously? My AM said IG can refuse an order if it is anticipating a dip to prevent losses from being incurred for the customer. So how long is btc going to be unlongable? Its extremely annoying.

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Guest Savvyscot

Yes me too. I have been trying to open long orders to balance out my increasing losses from my two shorts but it wont let me. So im now at quite a loss - trades still running so im having to pump in cash continuously. Im hoping for a big btc dip very soon or im going to have to keep shifting cash to ig for losses and to set up long trades - when it allows me!!

 

James @ ig can you guys not set up some sort of alert system so that folk that are trying to open a trade can be alerted that is not tradeable.

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The only people who get a lot of fun plunging naked into a market are those who play with other peoples money, have their eye on  commission, or, have very deep pockets. 

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Guest fmradio05

Its STILL going up. The problem with cryptos is, any FUD news will shake the whole market now, but now with futures coming, I believe it will be rising until the 15th at the very least probably in the range of 15K. When I shorted and lost more then 500 points, I had to liquidate it, I have no idea where the bull will run to. Having said that, all the best but when the pull back come, it will be spectacular.

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It's up a fair bit again today. Crossed over $14.6k

How are you holding up there buddy?

 

This one is tough to call - I think everyone is sensible in saying it's a bubble and will pop, but of course with the inevitable "when?" remaining unanswered.

 

If anything is going to tunr the tide of bitcoin's logarithmic boom it's going to be herd mentality once it starts to turn. My thinking is that without a significant enough event; that turn is unlikely and we'll only be seeing extreme volatility, (12th November it was below $5.8k), and thus far even the split of bitcoin cash wasn't enough to crash it.

I wonder how many millionaires and busts this has created.

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Something interesting I'm noticing on the charting (I'll get some hard numbers behind it in due course), is the inverse correlation between Bitcoin, and Ether/Bitcoin Cash.

Bitcoin's low on the 12th was marked by spikes in ETH & BTC-C, and today's stratospheric rise of Bitcoin is being marked by strong downward price movement on the other two.

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ChrisRobUK wrote:

Something interesting I'm noticing on the charting (I'll get some hard numbers behind it in due course), is the inverse correlation between Bitcoin, and Ether/Bitcoin Cash.

Bitcoin's low on the 12th was marked by spikes in ETH & BTC-C, and today's stratospheric rise of Bitcoin is being marked by strong downward price movement on the other two.

Interesting point of view. Do you think this is because flow is moving from these other coins into BTC to jump on the rally? Furthermore, if / when BTC turns will the money flow back into alternative coins or exit the marketing back into fiat currencies? 

 

You can see some flows by looking at the markets traded volume. Currently it looks like most volume is coming from fiat (USD, KRW, JPY). https://coinmarketcap.com/currencies/bitcoin/#markets 

 

2017-12-07 10_44_37-Bitcoin (BTC) $15393.20 (18.88%) _ CoinMarketCap.png

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Very good question. I would think it's possible (although unsubstantiated) that some of the funds have hedges with negative correlation between BTC and the other two in order to limit potential losses. They may have structured collars to generate more stable returns given the volatility. However you have a good point regarding the fact that the top 4 carriers with over 30% of the volume in the last 24 hours are USD, KRW and JPY.

 

Any chance of some professional money managers entering into the market with heavy funding?

 

Regarding your last point on the flow back to the others - that would be the proof, and something to watch out for. If the movements are inversely correlated then we know other players in the market are marking the two against one another. If uncorrelated, then just a dud theory.

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Bit of a long post, so, apologies.

The tl;dr version is that they were more positively correlated preivously than they are now. Plus a little conjecture on today's unusual movements.

 

Method:

Firstly I downloaded daily close data for BTC for the last few years and ETH since 2015.

Got the dates and prices aligned and ran some simple stats on them, as well as graphed on two-axis to represent side by side movements.

 

Firstly the stats and graphs since 2015.

 

image.png

 

image.png

 

Correlation over the life of ETH to BTC is actually quite high (.90962) and we can see the differences in the volatility.

However it includes a lot of pre-bubble data. So I've re-run the same simple stats over data since 28th July 2017.

 

image.png

As you can see, they are still highly correlated, however this only picks up daily close and not OHLC.

Interestingly, there are some convergence/divergence points as time carries on, which we'll get to in a moment.

The stats for the late July onwards data reflect a lower correlation (0.815) as well as increased BTC volatility and decreased ETH volatility.

 

image.png

 

 

And lastly, I took the price change for each day's move, based them as a % movement and graphed them as well as the same stats run.

This highlighted a decreased correlation and even some inverse situations, but not conclusive enough to base a trading strategy off of or support evidence that someone has hedged one against the other.

Nevertheless interesting to see the low correlation in daily % moves.

 

image.png

 

And the stats for the % price moves:

image.png

 

I welcome all thoughts over this.

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Enjoyed reading your work. A lot of people must be thinking what opportunities there are in simultaneously buying one crypto and selling another or trading differences.

 

I don't have a position in this market but created some charts Boll 20 & 3.00 MACD 12, 26 & 9 and Stoch 5 & 3 no confirmed sell signal yet but now market looks a bit stretched check out the daily Bitcoin (GBP) top bollinger band - it does not look like it will go much higher than the high already reached around 12,000 !!!! Going forward bar a massive security breach I think the frenzy will continue until all the possible bitcoins have been mined or the small gang of people who control Bitcoin roll out phase 2.

 

Enjoy!

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Hi all - can I just gently remind the community about our community guidelines and to refrain from foul language and personal attacks. For absolute transparency I can confirm that I have just had to remove a number of comments. Although we all have different opinions on trading strategy, risk management and market direction, at the end of the day we're all here for the same reason. 

 

If you disagree with a trade idea or comment by another community member by all means feel free to post, but lets keep things amicable and on topic.

 

All the best and happy trading.

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Guest Savvyscot

My sentiments echo your own James and trendfollower. I for one am learning a lot from the experience of others, my own mistakes and successes. We dont have to agree with each other all of the time but should respect others decisions/views/experience level at all times.

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This would all have to happen on a weekend wouldn't it when the office is shut  !!!!!!!!!!!!!!!!!!!!!!!  On another note Bitcoin is standing like the Statue of Liberty and a firework about to go off today. Cheers to the week ahead everybody.

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I thought this was all about trying to win a competition and win a prize from IG for our community spirit exchanging knowledge and ideas between each other, and having a bit of fun conversation when not trading or bored of looking at our screens waiting for a signal/alert?

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