One thing you should bear in mind while trading on any cryptocurrency market is that there tends to be more price volatility over the weekend. And this can definitely be very confusing if you analyse crypto markets with a traditional mindset. Today we will have a quick look at why the cryptocurrency market is so volatile on the weekends.
Unlike any traditional markets such as stocks, remember that cryptocurrency trading never sleeps. The cryptocurrency market is on 24/7 and that is what makes it so unique. If you bring any form of charting or tracking to your portfolio, then you will undoubtedly have noticed that volatility tends to be more apparent over the weekends. You may even have noticed that older bitcoin communities like to refer to it as the weekend dip.
I mean just look at what happened last weekend for BTC/USD market:
However, the reality is that the weekend dip doesn't really exist. What is very true though, is that the weekends are a time of great volatility for any cryptocurrency market - and this happens very consistently. Just look back at the last couple of months: over 40% of Bitcoin's price gains happened over the weekend. And of course, how can we forget Bitcoin reaching its all-time-high on a Saturday in December 2017. So is there more to this increased weekend volatility other than mere coincidence?
What could possibly be the culprit for increased price volatility on weekends? Well one of the main reasons, according to Bloomberg, is that major cryptocurrency projects do release news on Monday. This means traders speculate on price gains following the Monday announcements by buying in during the weekends.
Secondly, the weekend is a perfect time for the FOMO effect to really happen. For starters, traders may have been watching an asset's steady price gains all week and make an anxious impulse buy over the weekend. And also because even cryptocurrency traders socialize! Over the weekend you may find yourself discussing the latest market trends or most exciting projects with friends or colleagues.
But most importantly, the biggest influencer is a trading volume dip on weekends. This results in price movements being much more noticeable. It also means you will find more sophisticated traders who will use the "downtime" to actively influence markets and create easier paths to profit. The major price movements are possible because trading on Saturday and Sunday tends to be quieter.
Bottom line is Crypto Never Sleeps
I have said it before and will most likely say it again: never forget that crypto is a 24/7 market - one of the reasons why we recommend setting up crypto trading bots.
And this is the main culprit to why analysts have always been puzzled when trying to figure out or pinpoint the reasons behind the volatility of cryptocurrency markets. The real answer is simply because there has never been a market that operated in this way before. You will never see an article announcing that the cryptocurrency market is shutting down: at this point it's impossible. People will always be trading crypto and this is the main reason why the price can be hit by sudden volatility that we never saw coming.