Introduction

The quantitative report from February 3 to February 17 offers an in-depth analysis of recent trends and dynamics in the cryptocurrency market through multi-dimensional data analysis. The report focuses not only on key indicators such as volatility, long-to-short trade volume ratio, open interest, and funding rates for major cryptocurrencies like Bitcoin and Ethereum, but also highlights the liquidation situations in cryptocurrency contracts and the correlation between Bitcoin and traditional financial markets (S&P 500 ETF). Additionally, the quantitative backtesting section will provide a detailed analysis of the market performance of newly listed contract trading pairs, offering investors a more comprehensive market insight.

Summary

• Over the past two weeks, BTC volatility has decreased while ETH volatility has increased, signaling cautious market sentiment and diverging capital flows.
• The BTC long-to-short ratio fluctuated between 0.90 and 1.15, while ETH ranged from 0.85 to 1.05, with weak price rebounds.
• ETH de-leveraging has intensified, increasing volatility, while BTC open interest rose, and capital flowed toward mainstream assets, leaving sentiment unstable.
• Funding rate instability reflects a tug-of-war between long and short positions, with investor sentiment divided.
• The backtest shows that newly listed contract tokens will likely see short-term price declines, with an average yield of 18.23% from holding a 1x short contract for three days. However, caution is needed due to potential market volatility and external factors.

Market Overview

1. Bitcoin and Ethereum Volatility

Volatility is calculated using the standard deviation (STD) of daily price returns. A higher STD indicates greater price fluctuations and market uncertainty, while a lower STD suggests more stability. In mid-January, BTC reached a short-term high with high volatility, while ETH showed a downward trend. BTC’s trading activity was notably higher, possibly due to market optimism after Trump’s inauguration on January 20, as he was seen as crypto-friendly, driving Bitcoin’s price to a historic high.

However, by February, both BTC and ETH started to decline, with ETH’s volatility surpassing BTC. ETH’s price rebounds were weaker, and its declines were more severe, showing slower upward movement and greater vulnerability in downturns. This suggests that funds tend to flow into BTC during market recoveries, and during downturns, ETH experiences faster capital outflows, amplifying its volatility.

This could reflect a lower risk appetite for ETH than BTC, or in uncertain environments; funds may flow back into BTC as a safer asset. Additionally, market panic or capital withdrawals could exacerbate ETH’s volatility. Investors should closely monitor market sentiment to manage potential risks.[1][2]

Figure 1: Mid-January: BTC price reaches a short-term high, while ETH shows a volatile downtrend

Figure 2: In terms of volatility, BTC trading activity is significantly higher than ETH

2. Bitcoin and Ethereum Long/Short Taker Size Ratio (LSR)

The Long/Short Taker Size Ratio (LSR) is a key indicator of the market’s long and short trading volumes, often used to gauge market sentiment and trend strength. When LSR is greater than 1, it indicates more active buying (long positions) than selling (short positions), signaling a bullish sentiment.

According to Coinglass data, BTC’s LSR remains between 0.90 and 1.15, indicating a balanced market with long and short positions in equilibrium. The LSR shows an inverse relationship with price trends, suggesting that funds tend to buy the dip, and long positions remain cautious during price increases. ETH’s LSR has been more volatile, dropping to 0.85 before recovering, but with weaker price rebounds, indicating higher uncertainty about ETH’s price movements and slower return of long funds.

Overall, BTC shows relatively stable trends, while ETH exhibits higher uncertainty. Investors should monitor further changes in market sentiment.[3]

Figure 3: The long-to-short trading volume ratio of BTC stays between 0.90 and 1.15, indicating a balanced market struggle between bulls and bears

Figure 4: ETH’s long-to-short trading volume ratio fluctuated greatly, dropping to 0.85 before recovering, but the price rebound remained weak

3. Open Interest

According to Coinglass data, both BTC and ETH open interest (OI) have experienced significant fluctuations, reflecting changes in market leverage. BTC’s OI fell after an increase but gradually rebounded, indicating a recovery in leverage demand for BTC. In contrast, ETH’s OI showed more extreme fluctuations. According to Coingecko data, ETH dropped to a low of $2,368 on February 3, triggering a large-scale liquidation. The volatility in ETH’s OI far exceeds that of BTC, indicating a more significant withdrawal of leveraged funds from ETH.

ETH is undergoing more intense de-leveraging, which may increase market volatility. At the same time, BTC’s OI recovery suggests a flow of funds toward mainstream assets, with the market seeking a new direction. OI fluctuations reflect market sentiment instability, and investors should monitor leverage trends to assess whether the market is stabilizing or adjusting.[4]

Figure 5: Market leverage demand for BTC has increased, while ETH has experienced more severe deleveraging, which could lead to higher market volatility

4. Funding Rate

The funding rates for BTC and ETH have shown significant volatility over the past two weeks, reflecting changes in market leverage sentiment. Overall, ETH’s funding rate remained relatively stable, hovering around 0.01%, while BTC’s funding rate fluctuated more significantly, often falling into negative territory. This indicates a dominance of short positions in the BTC contract market, with market sentiment frequently leaning bearish, driving the funding rate negative.

In the past two weeks, BTC’s funding rate volatility further increased, with periods of noticeable negative rates. Coupled with a decline in open interest and an increase in long position liquidations, this may signal de-leveraging or a strengthening of short-term bearish sentiment. These funding rate changes serve as key signals for traders, potentially impacting short-term price movements and leverage positions.[5][6]

Figure 6: BTC and ETH funding rates have shown significant fluctuations over the past two weeks, reflecting changes in market leverage sentiment

5. Cryptocurrency Contract Liquidation

According to Coinglass data, the cryptocurrency contract market has experienced multiple large-scale liquidations over the past month, particularly on February 3, when $1.719 billion was liquidated, including $1.25 billion in long positions and $469 million in short positions. Overall, the market has seen active leverage trading with increased volatility, and leveraged traders should be cautious of the liquidation risks associated with sharp market fluctuations.[7]

Figure 7: February 3, Total Liquidation of $1.719 Billion

6. Correlation Between Bitcoin and S&P 500 ETF

Over the past two weeks, the 7-day and 30-day rolling correlations between BTC and SPY (S&P 500 ETF) ranged from 20% to 80%, showing a gradual upward trend. This suggests that traditional financial markets increasingly influence BTC.[8]

Figure 8: BTC and S&P 500 ETF Price Trends Show Gradual Upward Movement

From different time scales, the 7-day rolling correlation fluctuated between 40% and 80%, reflecting a strong but unstable short-term correlation between BTC and SPY. Meanwhile, the 30-day rolling correlation remained relatively stable, staying above 50%, indicating a sustained positive correlation over the long term.

Since mid-2024, the 30-day correlation between BTC and SPY has consistently stayed positive, showing that BTC is still influenced by the traditional financial market, with macroeconomic changes potentially impacting the cryptocurrency market.

Figure 9: The 7-day rolling correlation shows significant short-term fluctuations, while the 30-day rolling correlation remains relatively stable.

7. Significant Decline in Altcoin Market Capitalization

Since the beginning of this year, the altcoin market has experienced significant fluctuations, with market capitalization dropping by over 10% compared to early January. In contrast, Bitcoin’s market capitalization, though volatile, has remained relatively stable, indicating that during rising risk aversion, investors have moved funds from altcoins to Bitcoin. This period may have been influenced by factors, including regulatory uncertainty, large-scale leverage liquidations, and a decline in overall market risk appetite. Additionally, recent U.S. Government tariffs on imports have raised concerns about slower economic growth and higher inflation, potentially increasing global risk aversion and prompting funds to flow out of high-risk assets like cryptocurrencies.

Due to altcoins’ lower liquidity, panic selling can amplify their price declines. By mid-February, altcoin market capitalization showed signs of a slight rebound, indicating that the market may be starting to recover, or short-term capital may be flowing back. However, the sustainability of this rebound depends on market sentiment and capital flows.[9]

Figure 10: Altcoin market capitalization has dropped by more than 10% compared to the beginning of the year, while Bitcoin’s market capitalization remains stable with some fluctuations

Quantitative Analysis - How Will Newly Listed Contract Pairs Perform?

(Disclaimer: All predictions in this article are based on historical data and market trends. They are for reference only and should not be considered investment advice or guarantees of future market movements. Investors should carefully consider risks and make informed decisions.)

Over the past year, many newly issued tokens have shown a consistent decline in price, leading to a generally pessimistic market outlook for newly listed coins, with the belief that they are unlikely to experience long-term growth. As a result, shorting newly listed tokens has become a common strategy, with many investors and traders opting to profit from short positions in the short term.

But does shorting newly listed tokens offer sustained profits? This study focuses on the performance of newly listed trading pairs. The backtest covered 37 newly listed contract trading pairs on the Gate.io exchange from January 1 to February 7, 2025. The strategy opened positions at the closing price of the first 15-minute candlestick after the new pair’s listing, using a 1x short position with varying holding periods (15 minutes, 30 minutes, 1 hour, 3 hours, 12 hours, 1 day, 2 days, 3 days, and 10 days).

The backtest results show an average return of about 5% within 15 minutes of entry, with some pairs reaching gains as high as 55%. As the holding time increased, cumulative returns grew significantly after 3 hours. By the 10th day, the average cumulative return of the overall portfolio reached 30.13%. However, there were four cases where positions were liquidated, indicating that the strategy carries risks in certain scenarios.

In conclusion, the backtest shows that newly listed trading pairs can generate positive returns quickly; the longer the holding period, the greater the potential gains. It’s important to note that the decline in newly listed token prices may not fully reflect their intrinsic value or the project’s performance but could be influenced by broader market declines. The liquidation cases remind us of the need for robust risk management in real trading and the importance of considering external market conditions and asset volatility when crafting trading strategies.[10]

Figure 11: Statistical analysis of token portfolios held for different time periods.

mean: Average cumulative return of the token combination.

std: Standard deviation, indicating the degree of fluctuation in the data. A higher value suggests more dispersion from the average.

min: Minimum return, representing the worst-performing token in the combination.

25%, 50%, and 75%: The first, second, and third quartiles divide the data into four equal parts, showing the concentration and dispersion of the data. For example, a 25% return at 3 hours means 25% of tokens had returns lower than 1.3%.

max: Maximum return, representing the best-performing token.

Figure 12: Cumulative Return of Token Combination Increases with Holding Time

(Time unit explanation: 1 = 15 minutes; 2 = 30 minutes; 3 = 45 minutes; 4 = 60 minutes (1 hour), and so on; each unit represents a 15-minute time interval)

Conclusion

From February 3 to February 17, the BTC and ETH markets experienced significant volatility. Key indicators such as funding rates, open interest, and long/short trading volume ratios showed unstable market sentiment. BTC’s open interest gradually rebounded, while ETH’s open interest declined sharply before recovering. The altcoin market also saw significant fluctuations, with market capitalization dropping by over 10% compared to early January, indicating a large outflow of funds from riskier assets. Additionally, long and short liquidations increased significantly, with the market showing clear signs of upward and downward “washing,” reflecting heightened short-term uncertainty.

Following President Trump’s recent inauguration, a series of executive orders were signed, including tariffs on imports from several countries. This has sparked concerns about slower economic growth and rising inflation, potentially fueling global risk aversion and increasing market volatility.

Overall, the cryptocurrency market remains driven by capital flows and market sentiment in the short term. Investors should monitor leverage trends and market risks, and remain cautious with newly listed trading pairs to avoid blindly following speculative trends.


References:

1. Gate.io,https://www.gate.io/trade/BTC_USDT
2. Gate.io,https://www.gate.io/trade/ETH_USDT
3. Coinglass,https://www.coinglass.com/LongShortRatio
4. Coinglass,https://www.coinglass.com/BitcoinOpenInterest?utm_source=chatgpt.com
5. Gate.io,https://www.gate.io/futures_market_info/BTC_USD/capital_rate_history
6. Gate.io,https://www.gate.io/futures/introduction/funding-rate-history?from=USDT-M&contract=ETH_USDT
7. Coinglass,https://www.coinglass.com/pro/futures/Liquidations
8. Yahoo Finance,https://finance.yahoo.com/quote/SPY/
9. CoinGecko,https://www.coingecko.com/en/global-charts
10. Gate.io,https://www.gate.io/price/view/new-cryptocurrencies

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Disclaimer
Investing in the cryptocurrency market involves high risk, and it is recommended that users conduct independent research and fully understand the nature of the assets and products they are purchasing before making any investment decisions. Gate.io is not responsible for any losses or damages caused by such investment decisions.