US Bitcoin Price Highs Drives Staying Power as Asian Attempts Sputter
21 February 2020
Cryptocurrency trading’s nature of round the clock and global exchanges opens up regional opportunities with the swings of Bitcoin. While it would be simple to assume that trading volumes across exchanges would differ, the data suggests otherwise.
Regional sparks for bull and bear markets trigger linear trading volumes across all global major cryptocurrency exchanges even though they may appeal to local audiences.
This suggests that time zones are irrelevant when there is a trading opportunity. Simply put, trading volumes mimic across time zones and exchanges year-round.
The linear pattern does not end at trading volumes. Price movements and arbitrage movement opportunities are fairly even year-on-year. This data points to equal opportunities in longing as well as shorting Bitcoin for day-to-day traders.
That’s as far as the orderly markets go, however. Bitcoin price highs and lows are sparked from both Asia and the United States with Europe showing reactive response to arbitrage movements.
Zubr takes a deeper look at where the opportunities lie, patterns in outcome and regional preferences when Bitcoin volatility is either low or high on any particular day.
• When Bitcoin hits its daily high during US trading hours, it has the potential to spur on more highs the next day a whopping 63% of the time. When Asia pushes the price to the daily high, it drops below that price 69% of the time the next day. This indicates a fundamentals belief shift in US movements when bull markets start stateside.
• Despite round the clock trading, with some exchanges appealing to certain regions more than others, volumes by region as a percentage of the annual total is linear across major trading venues. This means time zones don’t matter when there is a trading opportunity.
• Bitcoin hit daily highs during traditional Asia markets trading hours 42.7% of the time in 2019. Bitcoin also hit its lowest price during Asia markets hours 43.3% in 2019.
• If the price of Bitcoin hits a high during Asian trading hours, there are increased arbitrage opportunities
• Price movements (in USD) and arbitrage opportunities (daily fluctuations) are fairly even on an annual basis. This means traders will need to utilize both long and short positions equally.
Due to non-stop trading on cryptocurrency markets, regional trading volumes outside of exchange insider data on its user base can only be a reasonable assumption. This research segregated regional trading volumes based on the hours found on major stock exchanges worldwide (see table 1).
1: Methodology: Trading Hour Seperation
While volumes as an absolute number on exchanges will most certainly differ, what is most important from the viewpoint of this research for regional trading is to identify whether or not there is symmetry across trading venues.
The data indicates that trading volumes as a percentage of their total annual to match with only few percentage point differences. Even more indicative is the fact that the percentages based on regional trading have also stayed fairly even over the past two years (see table 2).
2: Yearly % of trading volume by region (Based on timezone)
What the linear trading volumes on major exchanges also indicates is that time zones are irrelevant on cryptocurrency markets. Trading volumes move in unison across regions and exchanges when the opportunity arises.
Zubr’s research on market liquidity showed that when there is high volatility, there is a magnitude of difference in trading volume versus when there is low volatility. These arbitrage opportunities are not missed by any particular region due to time differences.
Another potential reason is traders have accounts across the board looking for the best opportunity liquidity can provide.
Peaks and troughs out of Asia
Daily price highs have most consistently been sparked by Asian markets. 43% of the price highs in 2019 have started from the Orient. Asian markets in fact have initiated the most highs year after year (see table 3 & 4).
Europe on the other hand only accounts for 13% with the remainder of price highs being sparked by the USA and a during a small window of EU/USA time overlap (see table 1).
3: By region: number of days Bitcoin hit price high of the day
4: By region: % of year Bitcoin hit price high of the day
But Asian trading hours have also been responsible for holding the most low price for Bitcoin too (see table 5 & 6). In fact, data shows that a trader is likely to find a better deal during Asian trading hours nearly double the amount of times they're found on US markets.
5: By region: number of days where Bitcoin had the lowest price
6: By region: % of year where Bitcoin had the lowest price
Asia Swings Both Ways
While price highs and lows don't account for opportunity depth, a look at the arbitrage opportunity shows that the numbers remain consistent.
Based on regional trading hours, Asia consistently has both the lowest and highest daily price difference (see chart 1 & 2).
When Asia pushes Bitcoin to its price peak, the probability of high arbitrage potential throughout the day is quite evident. But since 2017, these high arbitrage opportunities have been downtrending and coming closer aligned with global markets.
1: Minimum arbitrage opportunity by region/year
2: Maximum arbitrage opportunity by region/year
Regional Market Reactions
A pattern also holds as regions begin to react to price movements on a particular day. Rarely, for example, do highs and lows end within a single region's trading hours (see table 7).
7: 2019: Same region pushing high & low price of the day
The two major markets, US and Asia, share similar responses to each others highs and lows. In 2019, only 10% of the time were Asian traders able to bring a new daily low price point following a price high starting from the United States the previous day(see table 8).
Conversely, US traders only pushed Asian high price to a daily low 14% of the time (see table 10).
The data does show a downward trend of price reactions year-on-year. This could indicate that markets are beginning to come closer as price discovery improves.
While the US rallied prices from an Asian price low to a high on the same day happened 27% of the time in 2017, this fell to 19% in 2018 and 17% last year.
8: USA high price of the day converting to Asia low the next day
9: USA low price of the day converting to Asia high the next day
10: Asia high price of the day converting to USA Low on same day
11: Asia low price of the day converting to USA high on same day
Same Same But Different
Regardless if Asia or US traders pushed Bitcoin to its price high that day, volatility shows a very even pattern amongst the two regions (see chart 3).
71% of the time that Asia sparks a new price high the volatility will fall between 0-5%. US markets don't fall far from the tree either with 62% of the days that western markets push to daily highs are also within the 0-5% price difference range.
But US market highs show more upside when the bulls begin to run. 16% of the time that US traders have pushed a new daily high has resulted in a price difference upwards of 10%. On the other side of the spectrum, US highs only show a 3% chance of staying under 1% price difference.
3: 2019 Price Highs: Days vs. Volatility
No Market Discrimination
Despite the erratic behavior of Bitcoin prices, the percentage of days Bitcoin rises or falls shows symmetry once again in multiple perspectives.
Firstly, year-on-year, the number of days that bitcoin was higher or lower than the previous day is almost split right down the middle (see table 12). And secondly, the numbers closely resemble the day-to-day arbitrage opportunity (see table 13).
While the price of Bitcoin in US Dollars that can be volatile from an absolute value perspective, the data shows that markets don't discriminate opportunity and have a natural buy and sell dynamic. This means there is no single direction (in the daily trading sense) that Bitcoin will follow, but rather the opportunity for traders to cash in from both sides just as equally.
It's also worth noting that high arbitrage opportunity begets high arbitrage opportunity and vice versa just the same.
12: Price Movement Opportunity (USD)
13: Arbitrage Opportunity (% Diff. Low vs High)
One Difference: And It's a Major One
While the data so far has shown balance and orderliness, not all price highs are equal. A deeper look at market reactions to regional price highs shows a startling difference.
When Asian markets push Bitcoin to a new price high, there is almost a 70% chance that markets will quickly react and push the price lower by the next day (see table 14).
On the other hand, US market highs have staying power. Should the price of Bitcoin reach it's daily high on US market trading hours, there is a massive 63% chance that the price will continue its ascent (see table 15).
The key difference, a fairly large one, could point to a fundamentals price shift rather than an opportunistic one. And in fact this has been a key dynamic, percentage wise, year-on-year.
14: Asia high staying power when daily high comes from Far East trading hours from previous day
15: USA high staying power when daily high comes from stateside trading hours from previous day
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