Cryptocurrency Price Crash And Its Weekend Connection: Here's All

Bitcoin prices after hitting $38,000 levels in the previous session have again tumbled in trade on Saturday (June 12, 2021). At the time of writing this copy, as per the blockchain news outlet Coindesk, bitcoin (BTC) traded lower by 2.5% at $35,510. Other top crypto assets also registered a fall between 2-9%, with only USD Coin trading higher by a marginal percentage.

Cryptocurrency Price Crash And Its Weekend Connection: Here's All

Cryptocurrency weekly performance

As per a Zebpay report, this week bitcoin i.e. the largest digital token by m-cap witnessed extreme bouts of volatility with prices falling to $31,000 ( i.e. close to May levels of $30,000) from $39,000 and currently trading over $35,000. In respect of Ethereum the report said, trading in Ethereum remained quite rangebound, with the digital currency fluctuating between 2,350-$2,600.

Now here is given a brief on the cryptocurrency price crash/ high volatility and its weekend connection:

Analysts in the cryptocurrency universe have made note of a peculiar trend wherein cryptocurrencies show bearish price movement over the weekend and "the phenomena has been observed in the crypto market for last so many years now", Stephen McKeon, a finance professor and partner at Collab+Currency, a crypto-focused investment fund told CNBC.

Now there are various reasons cited for the crash in cryptocurrency prices or increase in volatility on weekends:

1. Lower trading volume:

'Fewer trades' or lower trading volume as cited by Amin Shams, professor at Ohio State University is one reason seen to drive weekend volatility in cryptocurrency prices. The volumes recover on Sunday night as Asian banks prepare to start their business day.

2. Crypto influencers:

Tesla's CEO Elon Musk influences cryptocurrency prices sharply. His one tweet on the cryptocurrency either in their favour or against them has the power to move crypto prices irrationally and the impact is seen to persist for quite a considerable time.

3. Staffing issues:

The high-level volatility seen in crypto prices over the weekend is also attributed to low staffing, to which market reacts by either rising or falling.

4. Margin trading:

Traders in the market borrow funds from exchanges to buy more of these crypto assets and when these crypto assets fall in price below a certain threshold then traders need to repay the margin call money. Now in a situation if the trader fails to pay off the debt then exchanges sell these holdings to get their money back. Such a situation triggers sell off in the market, which drags prices further down.

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