Crypto trading is a decentralized market, which gives traders the ability to buy and sell cryptocurrencies any time of the week. The market stays open outside of the workweek, which allows after-hours price swings in the market.
Although the market is open 24 hours, it does not see the same activity and trading volume every single day. In most cases, weekends tend to be slower and see less volume. Due to the less trading activity over the weekends, as well as margin trading and other factors, the fluctuations happen more actively during the weekends.
The weekend drops can be quite dangerous for traders; therefore, it is very important for investors to understand how and why they happen. According to the experts in the market, these drops have a huge impact on the market, as regulators are starting to talk about the long-term plans for the digital currency market.
Fluctuations on weekends
In general, cryptocurrencies are known for being highly volatile, because of which, the fast price movements and changes in the market are nothing new. However, the changes happening on weekends tend to be more drastic. In most cases, major crashes tend to happen over the weekends in the crypto market.
One of the professors at the University of Oregon, Stephen McKeon recently said that these massive changes on the weekends have been happening in the crypto market for several years now. One of the main contributors to the crashes happening over the weekend is that the market tends to be with fewer traders.
Because the trading volume over the weekends is so low, the same trade size that would not have a massive impact during the weekdays can have a huge influence on the price movements with less volume.
But why are there fewer traders on the weekends? There are many reasons for this, one of the biggest ones being that the banks are close, and traders are unable to deposit money to their accounts.
In addition, major statements have a bigger impact on the cryptocurrency market over the weekend. For example, when Tesla CEO Elon Musk posts something after hours, it is expected to have a bigger influence on the prices.
Although the trading volume has a huge impact on the weekend crashes, it is not the only contributor factor. There are many other things that could potentially have an impact on this trend.
One such thing is trading on margin. Trading using margin basically means borrowing money from the exchanges to buy more assets and is an exceedingly popular method of crypto trading. When the prices of cryptocurrencies are lower at a certain level, traders are required to repay the loan, a process called – margin call.
However, if there is an investor who decides to not pay the loan, the exchanges are able to sell the digital currency to ensure they receive the borrowed money back. Because the banks are closed on the weekends, most of the traders are not able to pay the borrowed funds because they simply can’t deposit money on their trading accounts.
Because they can’t cover the loan, the exchanges are selling off the assets, which further influences the price to drop. To avoid such risks, many traders are depositing funds into their accounts before the weekend.
However, although there are so many risks involved in the market, it still remains to be very popular around the world. The main contributor to crypto trading popularity is how easy it is to access the market. Nowadays, you do not even have to have a huge knowledge of the crypto trading market.
Automated trading is making the market easier to access than ever before. All you need to do is exchange and access the trading bot. By using the best crypto trading bot strategy, traders can make profits in just a few clicks without even having to open sell or buy orders.
Because the market is so popular, suddenly, when the activity drops over the weekend, even the slightest changes around the world tend to have a huge impact on the crypto prices.
Market manipulation & weekend dips
There are many experts who believe that one of the biggest contributing factors to the huge price fluctuations on the weekends might be people artificially trying to artificially change the prices.
In fact, there even was special research done by professors from the University of Texas at Austin and Ohio State University back in 2019 about this matter. As the research showed, a digital currency tied to the US dollar might have artificially increase bitcoin and other crypto prices back in 2017, during the crypto price boom.
That said, even market experts do not know the extent to which it might happen. There are some who believe that one way that people are influencing the price movements in the market is a method called spoofing.
This process envisages fake buy and sell orders to influence the price of cryptos by falsely creating different numbers of supply and demand. In addition, there are many others who believe that this mostly happens during the week, which increases the price. This ends up prices crashing over the weekend. However, there is no way of telling whether the theory is true or not, it might as well be speculation.
It truly is ridiculously hard to claim that one of these factors is the main thing that influences the price changes in the market over the weekend at such drastic levels. One thing is clear, however. The majority of the crashes in the cryptocurrency market are happening over the weekend. It might be the combination of the factors that we have discussed above or even one of them.
Keeping in mind the past experiences and this information might be quite helpful for traders when planning their positions and trades.