Welcome to ZUBR’s blog, a place where we explore the intricacies of the crypto derivatives markets. We analyze the patterns, pitfalls, and possibilities in the form of concise and detailed market research, available to all.
Sharing our findings allows us to explore market weaknesses and loopholes that have been exploited by many. It’s one of our ways of leveling the playing field.
To us, it’s all about fair play. With enough time, resources, and consideration, we believe we can create a competitive environment where people are rewarded for their strategic talent – not their financial backing or technological edge.
The majority of trading venues have settled for compromised solutions. The market needs an ethical entity that is motivated to provide better tools for traders – and doesn’t partake in dubious practices for profit.
Bold claims and empty promises have been popular marketing tools in this space for years. Instead, we choose to continuously evolve our methods and educate ourselves, staying true to our vision of a fairer trading environment – one that will see the crypto markets reach much-needed maturity.
Assessing Bitcoin’s Baseline Demand Through Trading and Volatility
Bitcoin’s volatility has hit this year’s low point, and with it, trading volume. The relationship between volatility and trading volume is one that has been closely studied in traditional financial markets to assess when markets return to equilibrium.
Despite Bitcoin still showing higher volatility than all traditional asset classes, the current status over the past few months has left the cryptocurrency bound just below the psychological barrier of the $10,000 mark. The status-quo holding for nearly two months has left pundits scratching their heads. But the data shows that there is still plentiful opportunity for astute traders.
Markets since 2017 have evolved as derivative volumes now dwarf spot markets. These leveraged products seemingly add more liquidity. And the traditional notion is held that with volatility comes increased trading volume.
ZUBR takes a deeper look at how Bitcoin’s volatility and trading volume have affected demand and supply markets since the cryptocurrency hit its all-time high.
Key Takeaways
- Daily Opportunities: Bitcoin’s daily opportunity remains very high when considering the potential to both long and short. The cryptocurrency almost mirrors any advance or retreat daily.
- Mirroring Effect: The majority of the time, Bitcoin will mimic the exact percentage increase with a percentage decrease on the very same day. This happens 25% of the time, with the change ranging between 0-1%.
- Intraday Arbitrage: Despite Bitcoin’s volatility nearing 1%, the intraday arbitrage opportunity remains in the 2-3% range.
- Volatility and Volume: Volatility doesn’t necessarily mean higher trading volumes. In fact, most trading happens when the price difference between the “Opening price” and “Closing price” is under 1%.
- Market Character: Bitcoin exhibits a unique character where swings between long and short positions are nearly symmetrical. This creates opportunities for traders, allowing them to benefit from both sides of the market within a single day.
- Lower Risk Opportunities: Historical data indicates that there are lower-risk opportunities if traders trust Bitcoin’s mirroring behavior. On any given day, a price increase of 10% is likely to see a similar decrease by the end of the day or the following day.
Deeper Insights into Bitcoin’s Trading Behavior
An important aspect within traditional financial sectors, such as stock markets, is the effect of information shocks. However, such shocks are less evident with Bitcoin, which has had an asymmetric response to favorable or less favorable news, especially when considering round-the-clock global markets.
Data provided by CoinAPI, and further analysis by ZUBR, show that Bitcoin, while volatile compared to traditional assets, exhibits a certain market equilibrium character. For example, if Bitcoin’s price increases by 10% from the opening price, there is a strong likelihood that it will also see a 10% decline from the same opening price – and vice versa. This “equilibrium swing” highlights Bitcoin’s trading opportunities on both the long and short sides.
Symmetrical Swings: A Key Opportunity for Traders
Looking deeper into the data, we can see that these daily swings near equilibrium occur frequently. For example, 30% of daily swings mimic each other within a margin of 1%, either falling short by -1% or exceeding by +1%. This symmetry creates potential for more calculated trading strategies, allowing traders to capture both the upward and downward movements within a day.
Furthermore, year-on-year analysis reveals that this trend remains consistent. Even as Bitcoin’s volatility fluctuates, this mirroring behavior persists, giving traders more confidence in using historical patterns as a guide for their strategies.
The Relationship Between Volatility and Trading Volume
Interestingly, while Bitcoin’s volatility is often seen as an indicator of market excitement and opportunity, the majority of trading volumes actually occur when volatility is low. ZUBR’s analysis shows that almost half of the trading volume happens when the price difference between the opening and closing price is between 0 and 3%.
While higher volatility may signal larger opportunities on paper, it is during periods of lower volatility that traders are most active, seeking to capitalize on smaller yet consistent opportunities.
As the Market Evolves
As the crypto market continues to evolve, staying informed and adaptable is crucial for long-term success. ZUBR is committed to helping traders understand not only the mechanics of volatility and market behavior but also how to strategically navigate these challenges. Our ongoing research and analysis aim to equip traders with actionable insights, empowering them to capitalize on opportunities while minimizing risks. By fostering transparency and fairness in the market, we strive to create a trading environment where knowledge, skill, and strategic decision-making take precedence over sheer financial power.
Never miss our data-driven, in-depth research that will help you develop sound trading strategies and market outlook.
Disclaimers Regarding Content
ZUBR has prepared these materials solely for information purposes. No part thereof, nor the fact of their distribution, should form the basis of, or be relied on in connection with, any contract, commitment, or investment decision. ZUBR does not provide financial, investment, tax, or legal advice and does not make any offer in relation to, or advertise, any services or instruments by publishing and/or distributing these materials.