Examining Almost A Decade of Price Data

Examining Almost A Decade of Price Data

The heatmap of the Candle Body Ratio shows that the price of Bitcoin displays stronger trends during certain hours. For instance, yellow squares represent trading sessions where there is a higher likelihood that BTC-USD displays a strong trend.

The dark purple squares show us when the candle body size is low compared to the difference between the session’s high and low. For example, on Wednesday morning between 00:00 and 02:00, we usually see choppy price action in BTC-USD.

Looking at the 01:00–02:00 hourly session across different days, we see that BTC-USD’s price action tends to be choppy in the first half of the week (Monday to Wednesday), while during the second half of the week strong trends occur more frequently in this hour.

The 11:00–12:00 trading session is usually directionless no matter what day of the week it is (although to a lesser extent on Thursday), as indicated by the purple squares during that time period.

We can also identify consecutive hourly trading sessions that display high Candle Body Ratios. However, looking above, we see that there’s no more than two consecutive hourly sessions with strong trending candles (i.e., the Candle Body Ratio is above 0.60).

There are usually two consecutive hourly sessions with strong-trending candles on:

1. Sunday mornings (01:00–03:00),
2. Tuesday nights (22:00–00:00),
3. Wednesday afternoons (14:00–16:00), and
4. Friday mornings (00:00–02:00).

According to the hourly price data, these four time periods are the best times to scalp or enter short-term trades in BTC-USD. Strong-trending candles, where the wicks are small in relation to the candle’s body, are usually observed during these times.

The same metrics are shown below for the 4-hour price data from BitMEX.

Price Change by 4-Hour Trading Session/Weekday for BTC-USD on BitMEX

Tuesdays (16:00–20:00) usually see the largest positive price changes on average according to the past three years of data from BitMEX.

On average, the biggest percentage drops happen during on Saturday nights (20:00–00:00).

Volatility by 4-Hour Trading Session/Weekday for BTC-USD on BitMEX

Volatility is usually highest in the 12:00–16:00 session on Thursday and the 16:00–20:00 session on Tuesdays.

Candle Body Ratio by 4-Hour Trading Session/Weekday for BTC-USD on BitMEX

Typically, we see stronger trending candles during the latter half of the day between 12:00 and 00:00, with Thursday being an exception. Most of the yellow and orange squares are found after 12:00, suggesting stronger trends develop in the American trading session.

We generally find the strongest trending movements during the early hours of Thursday morning (00:00–04:00) and Tuesday evening (16:00–20:00).

The dark purple squares show BTC-USD is normally trendless during these hours, e.g., on Wednesdays (08:00–12:00) and Sundays (00:00–04:00).

The heatmap above suggests if you are a trend following trader, you should be active in the hours that display yellow/orange squares and be more cautious entering positions during time periods represented by dark purple squares. The conclusions drawn here assume that historical price action will be similar to that in the future.

Winter months have been far more profitable for bitcoin traders (especially October and November), with higher median returns and greater volatility. April and May also have high returns on average, while September is usually negative. It’s also interesting to note that the returns for April have been positive seven out of nine years, and in the other years the loss in April wasn’t that large (around -5%/-6%).

Daily returns mostly cluster around zero, although there is a small tendency for returns to cluster around small, positive values on Saturdays. Historically, Saturdays have had the highest upside but Thursdays have had the largest drops. These two days of the week also display the largest variation in returns.

Using the 1-hour and 4-hour data for BitMEX’s perpetual swap, we’ve shown during which hours/4-hour periods are associated with positive/negative growth, high volatility and strong-trending candlesticks for BTC-USD. From the data that is available, some of the findings are:

• Monday mornings (11:00–12:00) are associated with choppy price action.
• Candles with low Candle Body Ratios occursmore frequently in the early hours of each weekday (00:00–04:00), except for Thursday.
• Two consecutive 4-hour trading sessions on Tuesday (16:00–20:00 and 20:00-00:00) are associated with high Candle Body Ratio readings — suggesting stronger trends develop during these hours.
• The price of bitcoin is more volatile, exhibits greater than usual growth and displays a high Candle Body Ratio reading on Tuesday (22:00–23:00).
• The early hours of Thursday (00:00–04:00) are associated with strong trending behaviour.
• Stronger trends on the 4-hour timeframe are more common in the second half of the day (12:00–00:00) for most weekdays (with Thusday and Sunday being exceptions).

Keep in mind that these trends may not always repeat themselves. These insights are just a starting point for looking at seasonality in the price of bitcoin. A deeper dive is coming soon.

Published at Wed, 05 Feb 2020 08:13:57 +0000

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