Market Insight # 12: The Sunday Effect

This is an article published about Fortune, but the article offers a very interesting perspective on the cryptocurrency market so I want to share it with everyone: Do cryptocurrencies tend to fall over the weekend? also known by name “Sunday Effect”.

The bottom line is that Bitcoin investors not only have to cope with the rollercoaster-like volatility of the week, they also can’t get a break from the weekend.

You can read the original article here: The Sunday effect.

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The cryptocurrency market never rests.

Cryptocurrencies are not tied to any regulatory authority and are freely traded on exchanges outside of standard hours, giving investors the privilege to buy or sell at any time.

Here’s a potential downside: Cryptocurrencies can experience large market fluctuations on weekends or even on holidays. In mid-April, 10% of Bitcoin’s value was offset in a single weekend.

Overall, Bitcoin returns are lower on weekends in 2021 than on other days of the week. Bitcoin’s average return this year is 0.29% on weekdays, compared to 0.17% on weekends, these are data from the fintech investment research YCharts. But for nearly half of the weekend, Bitcoin prices were higher on Monday when the market opened than they were on Friday, according to data collected by Eaglebrook Advisors, a crypto asset manager for crypto assets.

According to crypto experts, the following are some factors that will affect the weekend price change to create the “Sunday effect” regardless of whether Bitcoin goes up or down over the weekend.

1. Rest days for traders

Carol Alexander, a finance professor who conducts crypto research at the University of Sussex, recently observed a trend she names “Sunday Effect”.

US wealth managers, who they believe are instrumental in determining the price of cryptocurrencies, are almost always closed on Sundays, even though they occasionally trade on Saturdays. Without their participation in the Sunday market, the price will tend to fall.

She speaks: “Since April – wins on Monday and Sunday [đối với Bitcoin] really, really, completely different. “

She went on to say that the cryptocurrency market has changed more dynamically as more and more institutional players have entered the market since mid-2020. At this point, the official monetary control authorities allowed this to happen.

Some US trading companies engage in market manipulation, such as “wrong command” (the practice of placing large orders in the market without wanting to fulfill them) to increase the price. She shared that “It happens all the time.”

2. Liquidity

The Bitcoin market is dominated by a number of huge players. Bloomberg reports that around 2% of anonymous accounts hold 95% of Bitcoin. According to Roberto Talamas, an analyst with crypto research firm Messari, any move could be from these giants, commonly known as whales “Important effect” at the Bitcoin price.

The issue of liquidity gets complicated at the end of the week – when fewer and fewer investors tend to make trades. US investors can only trade with funds that are already in their accounts, as transferring more funds to the account requires the involvement of banks, custodians and financial institutions These organizations do not work on weekends.

Chris King, CEO of Eaglebrook Advisors, said, “Lack of liquidity is a big reason you are seeing some of the discounts”.

According to Talamas, regardless of what day you buy or sell, the Bitcoin market is an orderly market that trades continuously but intermittently. “There are many isolated exchanges”.

3. Negative news on the weekend

because Bitcoin “still very young”making it more prone to negative news.

Two weeks ago, Bitcoin suffered a massive decline after Elon Musk’s tweet that Tesla had suspended bitcoin payments, followed by an announcement from China that it would stop mining bitcoin in the market.

If such news comes out on the weekend, they may have Serious impact on the price of Bitcoinas some investors will know this information later.

4. Volatility

Finally, the problem regarding Use leverage every day of the week.

Many investors borrow money from their brokerage firm to place buy and sell orders. When the price goes down, the brokers ask them to return the money or add money to the order in the request “Request for additional funding”. If investors are unable to add more funds to their accounts in order to meet this requirement, their positions will be liquidated, lowering the price even further.

We only saw something like this last May.

The most recent crash reduced the value of Bitcoin by more than 30%, resulting in liquidations of nearly $ 8 billion. It was “Therefore exaggerated”.

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Translated and edited by Crap – Synthetic team