Bitcoin: Biggest Price Swings Happen on Weekends

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Bitcoin: Biggest Price Swings Happen on Weekends

Many people look forward to Saturday night as a much-needed respite from the workweek, but it seems to be the most important time for bitcoin traders to purchase and sell the most popular cryptocurrency.

Cryptocurrency trading is ongoing nonstop around the clock on multiple exchanges across the world. While many consider this as a bonus because of the potential advantages of profiting at the convenience of active traders, it also comes with the problems of continually watching prices and executing timely transactions to book gains and eliminate losses during the odd-hours. For avid crypto traders, it is simply a matter of frequent sleepless nights and hectic weekends. (See also: Bitcoin Price Swings Remind Morgan Stanley of the Dotcom Crash.)

Bitcoins Swings Wildly During Weekend

According to a CNBC story using data from CoinMarketCap.com, a review of bitcoin’s historical price data suggests that some of the greatest price fluctuations happened over the weekend. Think about the following:

  • On a Saturday in December 2017, the virtual currency reached an all-time high of roughly $19,600.
  • Over the weekend of June 9, it dropped to a recent low of $6,648.
  • Bitcoin prices have moved by at least 3% in either direction on 82% of weekends.
  • Since December of last year, about 60% of weekends have seen a 5% or more price change.

Image Courtesy: CNBC/ Datawrapper

“We’re seeing above-average volatility on weekends, with it going drastically up or down,” says Mark Newton, a former Morgan Stanley technical analyst and the president and founder of Newton Advisors, which offers cryptocurrency technical research to hedge funds and other organizations.

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The most recent instance, when bitcoin prices fell to a two-month low of $6,647.33 over the weekend of June 9, was attributed to news of a hacking of the South Korean cryptocurrency exchange CoinRail, as well as a report in The Wall Street Journal about a probe being conducted by US regulators into possible price manipulations in cryptocurrency trading. However, those two new goods were simply the beginning catalysts for the slide, and the main drop occurred over the weekend. (See also: What Caused Bitcoin’s Price Drop Last Weekend?)

Price Moves Accompanied by Low Volumes

Even if price fluctuations are significant, volume is lower on weekends. Individual orders are often large, with fewer orders altogether. It implies that huge cryptocurrency holders, known as bitcoin whales, are active over the weekend in order to accumulate or dump significant amounts of bitcoin and profit from weekend price movements. The activities of such large holders have a significant influence on cryptocurrency price movements, and they may be even more important on weekends when trading volumes are low.

Other systemic variables are at work in addition to the actions of these enormous numbers of people.

The fundamental cause of the observed trends is a mismatch between the usual operation hours of banks and the cryptocurrency markets. While banks normally operate 40 hours per week (Monday through Friday), bitcoin trading occurs around the clock. Many exchanges and brokers impose a high cost for purchasing virtual currency tokens with credit cards, thus individuals and businesses prefer bank transfer (ACH) deposits or wire transfers to avoid card fees. Because many active market players and companies want to buy (or sell) bitcoins over the weekend, they move funds on Friday from their associated bank accounts to crypto trading accounts. With funds in their trading accounts and little market liquidity, these individuals try to conduct transactions at extreme prices, contributing to large price movements. Low liquidity at any particular time in any trading instrument often results in huge price spreads.

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According to Brian Kelly, founder and CEO of digital investing company BKCM, CNBC: “There isn’t much fresh money flowing in to maintain prices over the weekend. It’s a thin market, which is worsened on the weekend when it’s even smaller.”

The Bottom Line

While trading 24 hours a day has its advantages, enabling a trader to trade whenever they want, trading at unusual hours might result in large losses. Along with the previously mentioned difficulties of uncontrolled trading with no upper or lower circuit breakers on price levels and no basic basis for cryptocurrency values, traders must also be mindful of another factor: the weekend impact. (See also: How Low Can Bitcoin’s Price Fall?)

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