Digital currency, also known as cryptocurrency, is a type of digital asset. It uses cryptography to regulate the creation of its variants and secure transactions. The decentralized nature of cryptocurrencies limits the extent at which governments and their financial institutions can interfere. Bitcoin, the first and most well-known cryptocurrency, was created in 2009. The crypto trading market is open 24/7, 365 days a year. However, weekends can still have an impact on the market. Let’s take a look at how weekends affect digital currency trading.
According to oracledispatch.com for professional traders, a commonly thrown term is the "Sunday effect." This effect refers to the tendency for coin prices to drop on Sundays triggering a flurry of sell orders. Documents show the bitcoin market and other cryptocurrencies face major price swings over the weekend and holidays.
This is due to the fact that there is often less weekend activity. Additionally, news events that occur during this time can have a greater impact on prices. Let's go through a brief history of how bitcoin prices see large sell-offs over the weekend and how this affects things.
One of the key factors that can cause prices to crash on weekends is trading on margin. Margin trading is a type of trading where traders borrow money from a broker to trade crypto. This money is then collateral for the trade.
When prices fall, traders who are on long trades will sell more assets to pay back the money. This sell-off can cause prices to fall further in cryptocurrency markets as others may also sell their crypto assets.
Furthermore, exchanges often have higher margin requirements on weekends. The implication of this is that traders will have to put up more collateral for their trades. This can also lead to forced selling. Thus, the further the price declines.
Another factor that can cause digital currency prices to crash on weekends is low liquidity. Liquidity is the ability of a digital currency to be bought or sold without affecting the price.
The digital currency market is a 24/7, 365-day market. However, trading activity tends to be lower on weekends and public holidays. This means that there is less demand for digital currencies, which can lead to prices falling.
Market makers who are responsible for providing liquidity in the market may also take advantage of low liquidity by selling digital currencies at lower prices. This can cause prices to fall further.
One of the major factors that can affect digital currency prices is news and events. Due to the paucity of information on this relatively new asset class, market data is often limited on weekends. This can lead to drastic price moves as investors attempt to interpret the news and make trading decisions.
For example, if there is positive news about a coin on a Saturday, prices may rise on Sunday as investors buy the currency in anticipation of future price increases. However, if there is negative news about crypto on a Sunday, prices may drop on Monday as investors sell the currency in order to avoid losses.
It’s important to remember that digital currency prices can be affected by news and events that occur during the weekend, so it’s important to stay up-to-date on the latest news.
The cryptocurrency market is open 24/7, but trading activity often slows down on weekends. This is due to the fact that many crypto exchanges are located in Asia. There the time zone is at least four hours and 12 hours ahead of Europe and the US, respectively. Also, Asian banks open when the rest of the world is still on a weekend.
With less trading activity on weekends, there is more of an opportunity for prices to fluctuate. However, this doesn’t mean that digital currency prices always go down on weekends. If there is positive news or an event that occurs during the weekend, prices may still increase.
Cryptocurrencies are still a relatively new asset class and are not yet fully understood or with regulations. This lack of regulation can lead to increasing price manipulation during the week. However, most large holders will offload bitcoins and other coin assets before the weekend. As such, the market manipulation causes bitcoin prices to fall drastically over the weekend.
One of the most recent factors that have been affecting crypto trades is the launch of crypto ETFs. Crypto ETFs are exchange-traded funds that track the price of cryptocurrencies. The first crypto ETF was launched in December 2017, and since then, several more have been launched.
The launch of crypto ETFs have a mixed impact on digital currency prices. On one hand, the ETFs have made it easier for investors to invest in digital currencies. This leads to increasing demand and higher prices for digital currencies. On the other hand, some analysts believe that the ETFs cause digital currency prices to be more volatile. This is because the ETFs can trade at a premium or discount to the underlying digital currency. For example, if the price of Bitcoin falls on a Saturday, the price of the ETF may not fall by the same amount.
The increasing volatility can be seen as a positive or negative depending on your investment strategy.
The digital currency market is open 24/7, but there are still factors that can affect digital currency prices on weekends. Volatility often increases on weekends due to less trading activity and news events that occur during this time.
By staying up-to-date on the latest news and using a digital currency tracking tool, you can help ensure that you don’t get caught off-guard by a weekend price swing. Stay up-to-date on all the latest digital currency news by following our blog.