As traders, we are always taught to search for unique patterns in pricing behavior in the market that repeat under certain conditions, the idea being to get an “edge” that will tip the odds in our favor. By following this tried and true advice, one can achieve the necessary 60%+ record of net-dollar trade gains, a goal that ensures survival in the topsy-turvy world of currency trading. This advice is on point in the crypto-verse, too.
In that vein, the folks over at Bloomberg have discovered that, “Surges in weekend activity since the beginning of May account for about 40% of Bitcoin’s price gains this year.” To support their findings, they published the following chart:
Sure enough, the five weekends enclosed by “green” circles have produced significant “gaps” to the upside in recent trading. Analysts at Bloomberg did not speculate on the reasons for these “weekend surges”, of late, but they chose rather to speak to industry professionals and seek out their opinions. Here are four of the best responses.
#1 – Ahead of the Pack
David Tawil, president of crypto hedge fund ProChain Capital, believes that the 24/7 nature of cryptos and the typical news cycle for announcing positive developments on a Monday are at play: “It’s absolutely unique. It’s a little bit of anticipatory or front-running the news cycle by trading up on the weekend. You’re somewhat flying blind in the sense that you don’t know if there will really be an announcement made on Monday morning but in a packed news cycle like crypto, where there’s developments really every day, I don’t think it’s wrong to bet that Monday morning would have a positive development.”
#2 – Groupthink
Hunter Horsley, chief executive officer of Bitwise Asset Management, has another theory. His idea is that traders are home on weekends and have time to converse with fellow traders and act upon good ideas: “The market is, by and large, retail individuals and I think that weekends are a time when those people have more free time to read the week’s news, to chat with friends, to pitch friends on exciting things they heard about during the week.”
#3 – Volume Plop
Montreal-based Jonathan Zeppettini, international operations lead at Decred, a digital currency, ascribes to the “low liquidity” hypothesis, which accepts that fewer traders may be in the market altogether: “The fact that these markets are operating when the banks are closed leads to price movements being exacerbated. It also takes a lot less to move the needle when everyone’s sleeping or it’s the weekend.”
Bloomberg Intelligence analyst Mike McGlone echoed a similar sentiment, but he attributed more of the action to professional types that know how to trade high volatility and low liquidity situations: “It is more Asia and those more sophisticated traders picking time and paths of least resistance to profit. I fully expect the leveraged money professional-types are utilizing all tools to spark moves and profit from.”
#4 – FOMO
Lastly, there is the “FOMO” thesis, which posits that anxiety driven observers of Bitcoin suddenly choose to abandon the sidelines, when they notice a major price jump on the weekend. Naeem Aslam, chief market analyst at Think Markets UK in London, falls into this camp of believers: “It is mainly driven by opportunistic investors. Those are people who are following the herd and have huge FOMO. Given the past few weekends, I am certain that many have been waiting to buy Bitcoin at a discount price. A price dip could be seen as an opportunity.”
Concluding Remarks
Are you thinking about jumping into the crypto market over the weekend? Since shorting cryptos is not that easy to do in the current environment, you might want to look for gain opportunities with this theory, regardless of which reason may be the correct driver. In any event, past performance is no guarantee of future outcomes. Last weekend was a rollercoaster that resulted in a substantial loss for weekend trading. Another bit of trading wisdom – When the “herd” discovers a new pattern and acts upon it, it soon dissolves, as if it never existed. The obvious lesson – Always adapt to changing market conditions.