The global and relentless nature of cryptocurrency trading poses a number of challenges for traders, one of which is finding the best time to trade.
Those looking to execute large buy and sell orders will need to identify times when there is maximum liquidity (availability of counterparties at any given time for you to exit or enter a trade) and trading volume (how many times a coin changes hands at any given time). It is as if a grocer with large quantities of products to sell would ideally want to set up his stall in the busiest market with the most visitors.
For novice traders or those looking to place smaller trades, liquidity is less of a concern. However, they may still want to trade on more established platforms, as prices on these apps tend to be less affected by large orders or manipulation.
Finding the right times to trade is not only a challenge for spot traders (people who buy and sell with immediate delivery of assets), but also for investors in decentralized finance (DeFi) tokens.
Blockchain transaction fees, such as Ethereum gas fees, may change considerably from hour to hour, and so it is especially important for beginners with small wallets to pay attention to these prices as gas charges are sensitive to network congestion rather than the size of a market.
For example, someone looking to trade $100 worth of cryptocurrency may end up paying double that amount in gas fees if they plan to run the trade at a busy time.
CoinDesk has asked crypto metrics companies, market analysts, and professional traders to help unravel the mysteries around crypto trading and why time matters.
Crypto trading had fairly simple patterns before mainstream adoption only started in earnest in mid-2020. Western institutions avoided cryptocurrency at all costs, and trading, along with other crypto activities like mining, was concentrated in Asia.
Until 2021, the Asian impact was so large that bitcoin bulls feared the Chinese New Year in February when miners dumped bitcoin en masse and drove prices down.
But these models have changed.
“During the 2017 rally, sunrise in Japan was a big problem for bitcoin prices,” said Mati Greenspan, founder and CEO of investment advisory group Quantum Economics. “Now that Wall Street is more intimately involved, much of the action has moved west.
“These days, the first Asian session is so thin that we suspect some traders could use it to manipulate the price,” he added.
There are plenty of data suggesting crypto trading activity coincides with traditional market hours in the United States, illustrating that crypto investing has largely shifted from East to West.
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“Bitcoin spot volume tends to peak during US stock market hours, especially at the opening bell,” said william johnsonan analyst at crypto analytics firm Coin Metrics.
According to a Coin Metrics chart shared with CoinDesk, the correlation with US trading hours was most pronounced in the first quarter of 2022, suggesting a clear evolving trend.
“Never trust weekends”
Crypto doesn’t rest on weekends, but US stock traders sleep. So what about the weekend trading activity?
“Put simply, weekends have a drop in smarter money participation,” said Cantering Clark, a pseudonymous crypto trader and market analyst, referring to capital controlled by institutions and professional traders. He explained that there is a high volume of activity by algorithmic trading robots and market makers (or liquidity providers) during the weekends. “The market is less attractive for trading,” he said.
According to a “realized volatility” chart from Genesis Volatility, there is less volatility on the weekends. Generally, traders look for volatility because it opens opportunities for lucrative trading.
“Weekends in traditional markets such as forex have always been known to be thinner. Knowing this, the banks would push the market to force the moves. The same can be seen in cryptocurrency, so for a very long time the idea was that all weekend activity was ‘bad’ and worth dying for,” Clark said.
If bitcoin rises over the weekend, traders often expect the market to fall during the week, explained clark. “Never trust the weekend” is a good thing to keep in mind. »