Is There a Trend in Highest and Lowest Bitcoin Trading Volume?

Identifying potential weekly & hourly trend in BTC trade volume

Background

There are stories of day traders suffering from the lack of sufficient rest and insomnia due to the stress arising from the unpredictability of the stock market. What about stories of traders who are invested solely in the cryptocurrency market that opens 24/7?

With no opening and closing trading hours, it is daunting to imagine having to track the cryptocurrency market 24 hours. How then, are cryptocurrency traders able to take breaks or have a continuous rested sleep?

This leads me to wonder:
Are there specific timings where there is a sharp rise or fall in share price? Is high volume correlated to any huge increase or decrease in share price?

Identifying such a trend and correlation could provide insights to when and how institutional investors trade and potentially assist retail investors like myself who are interested in entering this market. In this article, we will focus on Bitcoin and analyze dataset from Kaggle.

Volatility of Bitcoin

Provided dataset records relevant bitcoin prices and traded volume in a 60 second window period. To understand the volatility, we need to see how high and how low the BTC price can go in a month.

We need to transform the data to extract and calculate the following in months:

• Variable Weighted Average Price (VWAP)
• Highest price
• Lowest price
• Percentage Difference (High-Low/VWAP)

BTC is extremely volatile and even reaching a ~200% change in price in a month. Comparing two periods 2011–2016 and 2017–2021 (ignoring two anomaly points of ~200% and ~175%), BTC volatility is higher in recent years.

Weekly and Hourly Trend of Traded BTC Volume

A crucial part of this analysis is the attempt to identify any potential trading routines that institutional investors follow. We are guessing that weekday trading volumes is expected to be higher as institutional investors follow a weekday 9am to 5pm office hour routine.

Throughout the years, from 2012 to 2020, BTC Traded Volumes on Saturday and Sunday has always been the lowest, in line with our hypothesis.

BTC traded volume generally starts increasing from 2–5am and peaks at 1–3pm, differs from our expected peaks at 9am and 5pm.

Traded Volume and VWAP correlation

Days where traded volume is the lowest (Sat and Sun) and hourly trends have been identified. However, what does it mean for the BTC price? Is it true that sudden increase in BTC traded volume indicate a sudden increase in BTC price and vice versa? We will condense the data and compare hourly percentage changes in price and volume.

Direct relation between change in BTC traded volume and vwap.