Crypto users have long pervaded the rumour that the price of Bitcoins tends to increase on Friday and fall on Monday, and recent qualitative research from Bloomberg seems to confirms that observation
“(S)urges in weekend activity since the beginning of May account for about 40% of Bitcoin’s price gains this year,” the outlet writes.
Indeed, the highest price ever observed in Bitcoin was achieved on a Saturday in December 2017, according to data from the Bitstamp crypto trading platform.
Until now, few have compiled a set of cogent opinions about why this is the case, but Bloomberg’s Vildana Hajric has now done so rather brilliantly.
First, there’s what could be termed the “Monday Announcement Theory,” which is based on the idea that big corporations make important announcements on Mondays (also known as “Merger Mondays”).
If many traders observe the principle “buy the rumour and sell the news,” then an arbitrary purchase on Friday might be followed by a sell on Monday based at least partly on behavioural factors, said crypto hedge fund ProChain Capital president David Tawil:
“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.”
Then again there’s the “People Chat About it on the Weekends Theory,” similar to the “Thanksgiving Table Talk Theory,” in which Bitcoin’s last parabolic bull run was explained as being partly spurned by enthusiasts talking their family members into crypto investing over Thanksgiving weekend in 2017.
There’s also the “Big Crypto Conference Effect,” also known as the “Consensus Effect,” in which some claim that booms in the price of bitcoin and other cryptos immediately follow events like Coindesk’s massive Consensus crypto conference held every May for the past 5 years in New York.
Naeem Aslam, chief market analyst at Think Markets UK in London cited a sort of “Crypto Lemming Effect,” in which, “people who are following the heard and have huge FOMO (fear of missing out).”
Other theories get a bit more technical.
Jonathan Zeppettini, international operations lead for Decred, a digital currency project based in Montreal, espouses what might be termed the “Thinning Liquidity Effect.”
On weekends, fewer people trade overall, and this can lead to bigger price moves:
“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 reportedly favours this theory and suggested that sharks don’t stop swimming just cuz its Saturday:
“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.”
Sharks that do their homework might be the busiest of all, according to the “Friday Afternoon CFTC Commitment of Traders Report Happy Hour Theory.”
According to Bloomberg:
“The Commodity Futures Trading Commission publishes its Commitment of Traders Report late Friday, outlining latest open interest changes in futures and options contracts. Speculators can glean valuable information from the report, including the latest as to how traders are positioned in different securities. Indicators such as short-only positions provide details on how bearish traders may be on a particular security, while a look at historical data can provide an insight into bearish/bullish momentum — and that information can provide great trading fodder.”
If you can save some energy for Friday afternoon and put off going on your weekend tear, you might beat the more basking-style sharks, who need time to digest the Commitment of Traders report, says David Tawil:
“It would get digested as quickly as people can get to it and since it does come out on Friday afternoons, people may not be able to digest it until Saturday morning.”