Navigating Bitcoin's Weekly Cycles
Hyblock Research - January 2024
In this report, we focus on Bitcoin’s 2023 weekly price behavior and investigate the following questions:
How does the price of Bitcoin fluctuate during the week?
Do any patterns emerge in weekly highs and lows, or are these movements random?
How do weekly open interest patterns align with Bitcoin's price movements?
How does incorporating open interest data influence our understanding of Bitcoin's weekly trends?
What trends are observed in Bitcoin's hourly price and open interest?
When do the highest and lowest points occur within a 24-hour period?
Pay attention to Monday Price Action
The data for this report was sourced from the Hyblock Capital API, specifically referencing BTCUSDT (stablecoin margin) trading data on Binance for 2023. The time zone used is UTC.
Monday is the obvious outlier within this dataset.. The weekly low occurs on Mondays at a much higher rate than any other day. How much higher? If this were a true uniform distribution, where the probability of the weekly low occurring on any day is the same, there would be a ~14% chance (1 out of 7). However, on Monday, we see ~40% chance (21 out of 52 occurrences). In other words, the weekly low occurring on Monday is 3x higher than expectations. Friday has the second highest rate of weekly low occurrence (~20%).
Contrary to weekly lows, weekly highs are more equally distributed. Mondays also have a moderate frequency of weekly highs (23%). Interestingly, in the middle of the week, Wednesday and Thursday combine for 34% of the weekly highs.
Weekends, as most of our readers would expect, show low volatility and fewer extremes in price. Only 5.7% of lows are on the weekend and 19.2% of highs, pointing to less activity.
How can traders apply this information?
Mondays offer potential for initiating long positions with a higher reward-to-risk ratio on this day.
Mid-week could be opportune for taking profits or starting short positions.
Weekly lows rarely occur on weekends, potentially suitable for mean reversion strategies.
Adjusting positional entry sizes based on the weekly patterns observed
Layering in Open Interest
Open Interest (OI) follows a similar pattern. Mondays set the weekly low in OI at a 34% rate, 2.5x higher than expectations. Interestingly, Monday also had the highest occurrence of weekly highs. OI follows a similar mid-week pattern as BTC price. However, OI shows patterns on weekends that price does not. Saturday does not have a single occurrence of a weekly OI high.
How often does OI high/low align with price high/low?
Naturally, we look into these similarities between OI and price patterns. While we know that Mondays are significant on both weekly price and weekly OI, do they always occur on the same day together?
In 21 out of 52 instances (40%), the weekly high of OI and price occurred the same day
In 22 out of 52 instances (42%), the weekly low of OI and price occurred the same day
Weekly highs on the same day are distributed relatively evenly across the week. In stark contrast, weekly lows on the same day occur predominantly on Monday
Daily Analysis – Dissecting the Hourly Behavior
Now we dive into the hourly trends of BTC price and OI. Providing a detailed breakdown of when the highest and lowest points are typically reached within a 24-hour period. The first graph displays the frequency of daily price highs and lows, while the second illustrates the frequency of daily OI highs and lows.
Price:
The daily open often marks the high or low. In particular, the first hour of the day (UTC).
There is a small chance of the daily high/low occurring between 03:00 - 11:00.
The second half of the day, specifically around 14:00 UTC - 16:00 UTC has a high chance of marking the daily high or low.
Open Interest:
The hours around daily open (21:00 UTC - 2:00 UTC), have a high chance of marking the daily open interest low.
The daily high in OI typically emerges in the latter half of the day, especially from midday to late afternoon, around 12:00 to 17:00 UTC.
Now that we understand the patterns around the days and hours, let’s look at them combined.
Do any specific hours on a certain day stand out?
Pay attention to the first hour on Monday, which easily has the highest probability of marking the highest or lowest price of the week. 40% of weekly lows have occurred on Mondays, and almost a third of those lows occurred in the first hour of the day.
If we assume that the chance of a high (or low) is random and should occur at the same rate on any given day/hour combination, then the expected frequency is 0.3. There were 6 weekly lows on the first hour of Monday (out of 52 weekly lows), which is 20x more likely than expectations, and 4 weekly highs (13x more likely than expectations).
As price sets low on the first hour of Mondays, so does OI. This tells us that there is a cleansing of both long and short positions to start the week. In fact, ~20% (10 out of 52) of the weekly OI lows occurred in the first 3 hours on Mondays. This is 11 times more likely than expected.
Midweek, we see the highest frequency in weekly OI highs, particularly on Wednesday and Thursday afternoons, suggesting a buildup of market activity and trader commitment.
Appendix
Listed below is a weekly breakdown showing the price highs and lows of the week.
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