For bitcoin traders, key times to buy or sell often come at the least opportune time to be behind a computer monitor: Saturday night.
Some of the digital currency's steepest price swings have happened over a weekend. Bitcoin hit its all-time high near $20,000 on a Saturday in December, and dove to a recent two-month low this Sunday.
Roughly 60 percent of weekends since December have seen a 5 percent or higher price move over a weekend, and 82 percent of weekends have had at least a 3 percent move in either direction, according to data from CoinMarketCap.com.
Low liquidity, and limited bank hours have made it all the more challenging for U.S. traders to capitalize on these weekend price swings.
Mark Newton is one analyst on-call during odd hours. The former Morgan Stanley technical strategist has notifications on his phone through the Coinbase trading app, and had been watching for alert when bitcoin hit $7,345 before he cut his losses. This Saturday, bitcoin fell, his Coinbase app lit up, and Newton clicked the sell button.
"Rule no. 1 is you don't pick losses, you don't sit there and try to defend a bad position — it's not emotional," said Newton, president and founder of Newton Advisors. "We're seeing above average volatility on weekends with it moving dramatically up or down."
Newton works with hedge funds and other firms to provide crypto technical analysis. He gave clients the heads up Sunday that a key "stop loss" milestone had been triggered. It's possible bitcoin's price dive was accelerated by hitting that level, which forced a wave of selling by multiple traders, he said.
Others attributed the 10 percent sell-off Sunday to news of a hack in South Korea and a Wall Street Journal report about U.S. regulators investigating potential price manipulation at exchanges. Over the weekend, world's largest and most valuable cryptocurrency plunged below to a two-month low of $6,647.33, according to CoinDesk.
Low volume
While the hack and Wall Street Journal report may have fired the starting gun, the major price drop happened later that afternoon. Volumes rose roughly 25 percent around in the early afternoon on the East Coast, according to CoinMarketCap.com. Around the same time, bitcoin prices dropped sharply. That pattern, according to eToro analyst Matthew Newton, could have been the result of a large sell order.
"That serious uptick in volume around 6 pm BST was when you saw that really violent move downward," said Matthew Newton, U.K.-based analyst at eToro. "It certainly seems to have accelerated the drop."
For bitcoin, 24-hour trading dollar volume has fallen by more than 60 percent this year after starting the year above $12 billion, according to CoinMarketCap. "Whales," or holders of large amounts of bitcoin, have a massive influence in the market — and can be even more influential when trading volume is low on weekends.
About 1600 wallets, or accounts, hold roughly 28 percent of that total bitcoin in existence, according to data from BitInfoCharts. One of these whales placing a large buy or sell order on weekend can have an especially drastic effect on an already "thin" market, eToro's Newton said.
Bank hours
One reason trading tends be be thinner on weekends is because most people don't have access to their bank accounts. Bitcoin trading happens 24 hours a day, 7 days a week while banks are typically open 40 hours a week.
When time is not a concern, people use bank transfers to purchase bitcoin and save on purchasing fees. Most cryptocurrency exchanges will charge about a 4 percent fee for card cryptocurrency purchases. Some exchanges like Coinbase and eToro support credit cards for deposits or withdraws in fiat currencies. But that's not an option on other exchanges like Gemini or Kraken. In order to fund your account with U.S. dollars on those exchanges, you have to link a bank account and initiate a Bank Transfer (ACH) deposit or wire transfer.
Buying the dips, or making money off of these swings on a weekend requires using a debit card, or trading one cryptocurrency for another. That becomes tricky for some hedge funds, who are used to trading in and out of fiat currency.
Brian Kelly, founder and CEO of digital investment firm BKCM, said funds like his are often forced to take a position Friday before those banks close since he mostly trades in and out of U.S. dollars.
"For hedge fund managers, you often have to decide 'what do I wanna look like for the next two days," Kelly said. "If I have 10 percent in cash in my fund and I want to buy that dip Sunday, I don't have much of a choice."
In an emergency, Kelly might trade through over-the-counter, or OTC markets. But those marketplaces are only available to SEC-registered and FINRA-approved broker-dealers.
With fewer traders able to access to their banks, weekends tend to be marked by low liquidity. Kelly highlighted that this gives a big trade, or any news events an exacerbated effect on the market.
"Over the weekend, there's not much new money coming in to support prices," Kelly said. "It's a relatively thin market and news is exacerbated over the weekend when it's even thinner."
Bitcoin is still searching for its footing after Sunday's $1,000 plunge and was trading near $6,745 Tuesday. The digital currency has dropped by roughly 50 percent this year, after its epic 1,300 rise in 2017.