Market Overview - May 2020

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Relative Returns

The month of the third Bitcoin halving came and went with mixed signals throughout, affecting the overall crypto market and not just Bitcoin. Some assets were able to make up for a sharp drop that occurred just before the halving on May 9th, towards the last week of the month of May 2020. However, unfortunately for EOS, XRP and LTC that increase was not quite large enough to end in positive regions at month's end.

The beginning of the month was filled with uncertainty. Last month, in April 2020, all assets covered in this report had exceptional runs, some even sitting in the region of 70% price gains at the end of the month. However, as mentioned in the last report, the pattern before the previous two Bitcoin halvings are also not conclusive. In 2012 we had a down month leading up to the halving, and 2016 it was more of a spike followed by a correction. This time around there was an extreme bull month in April 2020, but looking closely we can see a correction, small in general terms, towards the last days of April 2020 (Graph on right side). At the end of last month, that drop was not enough to confirm that the 2016 pattern will repeat itself, however looking at the price graph for May 2020, there might be an argument.

The beginning of the month started tight, the market was overall uncertain how to price the drop from the prior month into the overall very bullish feeling that stayed throughout April. In the first week of the month of May, it seemed like that the Bears had made up their mind to drive prices into lower regions, however that was very short lived. The Bulls took the lead again, pumping projects up by almost 20% in the 4 days following the lowest point of the drop. However, the brief euphoria created by the Bulls was then halted around May 9th, when all projects started falling aggressively, a potential repeat of the price moves prior to the 2016 halving. However, the two moves are not identical and do exhibit different characteristics, both when the drop occurred and how the drop happened. It’s not clear whether the similarities between price moves around this halvening and the previous halvening have any shared causality or predictive power, but the repetition seems to be the outcome preferred by many crypto market participants.

Analyzing the drop around May 9th in more detail shows that the full magnitude of the drop was just under 20%, with the majority of that decrease happening in a drastic, but not unfamiliar, crypto fashion. It is not fully clear what caused the drop, but it is clear that judging by the magnitude it came as a surprise to many participants.

The month of May 2020 ended with 4 assets (ETH, BTC, TRX and XLM) finishing in the green. Ethereum was the star performer this month with a gain of just above 14%, with EOS and XRP finishing at a just below 5% price decrease throughout the month.

To conclude, It does seem like the price behaviour is similar to what was seen around the 2016 halving, in general terms. We did have an increase in prices followed by a drop just before the halving, even though it was not in the same style, it still shows many overlapping features. For the rest of the month, prices steadily increased, without any sharp drops. There was a trough in the second part of the month, but that was quickly reverted, ending the month with relatively strong bullish sentiment even with a small correction in the last days of May.

May 2020, Biggest Changes
Asset Pair Price IN USDT
(April 1st)
(May 1st)
(May 31st)
Monthly %
Bi-Monthly %
ETH_USDT 132.87 208.94 238.79 ↓ +14.27% ↑ +79.72%
BTC_USDT 6368.74 8675.10 9555.79 ↓ +10.15% ↓ +50.04%
TRX_USDT 0.01154 0.01549 0.01637 ↓ +5.68% ↓ +41.85%
XLM_USDT 0.04012 0.06876 0.07264 ↓ +5.64% ↓ +81.06%
EOS_USDT 2.211 2.8403 2.7152 ↓ -4.40% ↓ +22.80%
10-Hour Rolling Volatility

The volatility graph for this month is in line with the price chart and the overall sentiment about the crypto market. For the majority of the month, volatility was not driven by individual assets but more driven by the market itself, with most assets tracing each other quite closely.

The most prominent volatility spike coincided with the sharp drop before the Bitcoin halving, and towers above the other this month at around 0.03. Putting that in relation, April’s biggest volatility spike was 0.02, which makes this one seem large, but looking back a few months, spikes in the region of 0.1 were not that unheard of. Making what initially seems to be a large spike, actually not quite as radical as initially expected. Comparing this month’s volatility with the last 4 months shows that this is actually one of the less volatile months in 2020.

However, TRX seems to have had a more turbulent month than its peers. In most spikes, it sits at the top and some are individual and exclusive just to TRX. Looking at the spike before May 24th, for example, shows that it was only really experienced by TRX. It broke through two intraday support lines that day and experienced some decent selling pressure, hinting at that being the reason for the spike in volatility. Somewhat contradicting, is that just days before, the Tron foundation issued the first airdrop of JUST (JST) to the holders of TRX, and they plan on increasing that amount for the next 12 months. The good news may have been priced in later and might explain part of the run that TRX had with the other projects.


Now for something new! Looking at the correlation matrix, it shows an interesting picture that we have not had in the previous issues of this report. There seems to be a clear box of 4 pairs that experience above average correlations, the majority of them being over 0.9.

The 0.94 correlation reading between LTC & EOS is the largest we have recorded yet and shows almost perfect correlation between the two pairs. Between LTC, ETH, XRP and EOS the smallest correlation is at 0.87, which would still be with the top spots in the last few reports. Making all 4 pairs very good candidates to keep an eye out for potential pair strategies. Especially interesting is the ETH & LTC pair which has now consistently given reading around the 0.9 region for the last few months.

Even looking outside the orange box, the other pairs are still coming in at around 0.8, with XLM & BTC having the smallest correlation coefficient at “just” 0.7. Displaying that in this month most projects at least experienced every similar movement throughout the entire month.

Interesting to note is that the most correlated pairs are the ones that performed the worst in terms of price gain, with the exception of ETH. EOS, XLM and LTC were the three that finished the month with negative gain, but are the ones with the highest correlation readings. Keeping an eye on the bottom of the pack for Pairs trading might not be a bad idea at all.

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