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 who want to execute large buy and sell orders will have to identify times when there is maximum liquidity (availability of counterparties at any time so you can leave or enter a trade) and trade volume (how many times a coin changes hands at any given time). It is as if a merchant with large quantities of products to sell would ideally have set up his stall in the busiest market with the most visitors.
For beginners or those who want to place smaller trades, liquidity is less of an issue. However, they may still want to trade on more established platforms, as the prices of these apps tend to be less affected by large orders or tampering.
Finding the right times to trade is not only a challenge for spot traders (people who buy and sell with instant delivery of assets), but also for investors in decentralized finance (DeFi) tokens.
Blockchain transaction fees, such as Ethereum gas fees, may change significantly from hour to hour, and therefore it is especially important for beginners with small wallets to be aware of these prices, as gas charges are sensitive to network congestion rather than the size of a market.
For example, a person who wants to trade $ 100 in cryptocurrency may end up paying double the amount of gas fees if they plan to trade at a busy time.
CoinDesk has asked cryptometric companies, market analysts and professional traders to help unravel the mysteries surrounding 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 trade, along with other crypto activities such as mining, was concentrated in Asia.
Until 2021, the Asian influence was so great 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 major 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 is lots of data suggesting that crypto-trading activity coincides with traditional market times in the United States, illustrating that cryptocurrencies have largely shifted from east to west.
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“Bitcoin spot volume tends to peak over the US stock market, especially at the opening bell,” he 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, indicating a clear development trend.
“Never trust weekends”
Crypto is not resting on the weekend, but US stock traders are asleep. So what about this weekend’s trading activity?
“Simply put, weekends have a decline in smarter cash participation,” he 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 from algorithmic trading robots and market makers (or liquidity providers) on weekends. “The market is less attractive for trade,” he said.
According to a “realized volatility” chart from Genesis Volatility, there is less volatility on weekends. In general, traders look for volatility because it opens up opportunities for lucrative trading.
“Weekends in traditional markets like forex have always been known to be thinner. Knowing this, banks would pressure the market to force movements. 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,’ said Clark.
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. »