----Web3 Caution: Trading requires caution, and long-term gains come from careful strategies. This document does not constitute financial advice.

BounceBit is a project focused on building BTC Re-Staking infrastructure. It has created an innovative CeFi + DeFi framework that allows BTC holders to earn returns across multiple networks. Highlights of the project include staking mechanisms, dual-coin PoS, and liquidity custody concepts. Although much has been discussed regarding the token economics, what I want to know is whether its token market makers have ever defended the price, typically selling off during significant declines in BTC and ETH. Thus, I have collected and organized BB's K-line growth data and compared it with the K-line fluctuations of BTC and ETH, conducting a correlation analysis.

The figure below shows the 4-hour closing price trends of BounceBit, Bitcoin, and Ethereum over the past 90 days. Clearly, the price levels of the three differ significantly, necessitating different axes for easier comparison. The chart indicates that BTC and ETH are generally in a fluctuating upward trend, while BB exhibits greater volatility and relatively lower prices.

The chart below depicts the changes in the 4-hour returns of the three assets over time. The volatility of BounceBit is significantly higher than that of BTC and ETH; the return fluctuations of BTC and ETH are smaller and more concentrated around zero.

4-Hour Return Scatter Plot

To visually observe the correlation, we plotted scatter plots of BB with BTC and BB with ETH (with the x-axis representing BounceBit's 4h returns and the y-axis representing the 4h returns of the comparative assets).

The vast majority of point clusters are concentrated around the middle position, forming an upward-sloping oval, indicating a positive correlation between the two. ρ≈0.6185 indicates that the volatility of BounceBit is larger than that of BTC, but the direction of price movements shows some consistency.

The clusters of points exhibit a more pronounced positive diagonal trend, indicating that BB's correlation with ETH is slightly higher than with BTC (ρ≈0.6581).

Conclusion and Recommendations

  • Positive Correlation: The 4-hour returns of BounceBit are moderately positively correlated with both BTC and ETH, indicating that its price movements are significantly influenced by mainstream market trends. Investors should pay attention to overall market sentiment, which also applies to BounceBit.

  • Risks and Volatility: From the return trends and scatter plots, it is evident that BounceBit's volatility is significantly greater than that of BTC and ETH, which may relate to its shorter listing time and insufficient liquidity and market depth. Investors should be cautious of potential large price fluctuations.

In summary, BounceBit (BB) shows a significant positive correlation with mainstream coins BTC and ETH at the 4-hour return level, but with greater volatility. Investors should consider both the project's fundamentals and the overall trends in the cryptocurrency market when assessing BounceBit, while also being aware of its own high volatility risk.