The cryptocurrency currency market lazy on weekends and eventually collapses.
Price volatility is a huge concern in the cryptocurrency market. There is also some volatility in the stock market, but the relatively new cryptocurrency currency market understands less. In May this year, HSBC, Europe’s largest investment bank, banned its interest in cryptocurrency as an investment because it was “too volatile”.
Under the understanding of experts, analysts noticed a recent trend – cryptocurrency collapses usually occur on weekends. Stephen McKeon, a finance professor and partner at Collab + Currency, which focuses on conspiracy, explained in an interview that liquidity requires an examination of the supply of buyers and sellers. If there are few buyers compared to sellers or vice versa, transactions will fluctuate, leading to a spike or crash.
Another reason that Amin Shams, a professor at Ohio State University, explains is the connection between the cryptocurrency currency market and thin trading volumes that cause dramatic fluctuations. In addition to this, there are influential people like Elon Musk who can change the course of the cryptocurrency market with a single tweet.
Understanding the market structure
The cryptocurrency foreign exchange market consists of several stock exchanges with their own policies because there is no centralization. The cryptocurrency currency market is also active 24 hours a day. So when people trade, when people are awake, when people watch the market and make big moves, they also affect market behavior and price fluctuations.
While there are still several theories about this weekend’s market laziness, one of the explanations given by Teddy Fusaro from Bitwise Asset Management shines. He believes traders should expect less liquidity from the market on weekends and predicts that this trend will continue in the future. His theory is simple, market makers are less burdened on weekends, so it reacts with a rise or fall.
Margin trading also plays an important role. Usually, merchants borrow money from stock exchanges and buy smuggled coins. When the value of a coin drops to a certain level, they have to repay the debt. But when traders are unable to pay back, stock exchanges sell shares to make money. Such cases increase on weekends when banks are closed. This triggers the price.
Remember the Reddit case, which caused great unrest in the market. Such market manipulation is often a visible reason. The 2019 study talked about a situation where Tether, a stable coin, artificially inflated Bitcoin and altcoins during the 2017 cryptocurrency boom. While many analysts are on the fence about this theory, it cannot be completely ruled out.
Whether it is a decline in trading or a lack of functioning banks, this phenomenon of critical foreign exchange markets only on weekends is coming with convincing evidence of the fact week after week. What do you think?
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