It’s well-known that cryptocurrency crashes occur on weekends, according to some.
According to Stephen McKeon, an associate professor of finance at the University of Oregon and partner at cryptocurrency investment fund Collab+Currency, this has been going on for some years.
Experts think the weekend dips might have a big impact on how authorities see digital money. Why do these crashes occur?
Weekend trading is down
Weekend cryptocurrency volatility is due to fewer trades, according to Amin Shams, an assistant professor of finance at Ohio State University in Columbus.
Prices can move far more when volume is minimal, he says.
Investors may not be able to put funds to their accounts because banks are closed on Saturdays, according to McKeon.
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On sometimes, he remarked, “the market panics and sells aggressively.”
As Asian banks open Sunday night, a bounce usually occurs into Monday, McKeon said.
Tyrone Ross, CEO of Onramp Invest in New York, says bitcoin leaders like Tesla CEO Elon Musk “wave a heavy hand over the crypto space.”
Musk’s harsh tweets on bitcoin after-hours may cause a surge.
An investor borrowing money from the exchanges to buy more assets may also be a factor in weekend price volatility, Shams says.
For traders, a “margin call” occurs when the price of digital currency falls below a specified threshold.
Instead of selling the cryptocurrency, exchangers may sell it to recoup the debt.
Shams warns that with banks closed over the weekend, some traders may struggle to pay back borrowed funds, sparking exchange sell-offs and further borrowing costs.
He continued, “That will further reduce the price.”
Then there’s the issue of price manipulation.
Shams: “Many studies reveal [market] manipulation.”
The 2017 boom may have been overstated due to tether, a digital currency pegged to the dollar.
According to him, researchers don’t know how often it is.
One theory involves creating a false feeling of supply and demand by spoofing purchase and sell orders.
Some say it happens more frequently during the week, leading digital currency prices to soar. But, he added, this is just supposition.
These practices have “mixed views,” say some experts.
No solid evidence of tampering has been shown to McKeon.
ETFs for cryptocurrencies
Regulators assessing the approval of bitcoin exchange-traded funds face obstacles.
It’s a mismatch for crypto ETFs because investors can purchase and sell cryptocurrencies 24/7.
Desperate sellers may have to wait until Monday to sell their crypto ETFs.
Ahead of the SEC approving crypto ETFs, Chairman Gary Gensler urged for more investor protections.
In the meantime, the SEC is considering various bitcoin and ethereum ETF proposals.