Why weekends are meant for crypto downfall?
The weekend downfall in the prices of cryptocurrency is turning out to be cyclic market nature from the past couple of months. The pattern identification of the market might result in negative weightage while government regulators evaluate the cryptocurrency as a digital currency in the long term.
While there hasn’t been a conclusive backing behind the momentum during weekends, experts say that the fluctuations happening on weekends can be because of considerable low volume, margin call and other factors.
You signed in for volatility. What’s crypto without volatility?
The major sense of adoption among retail investors came for cryptocurrency just because of fascinating returns without giving in ample time for financial research. However, it is sometimes the same volatility that sends the investor or you can say a first-timer back home. Trust me, I was one click away from liquidating my crypto assets as soon as BTC tumbled below $40K for the first time. It made me realize that volatility will be part of the game especially in case of banning or abandonment of the digital currency by the central government or the financial regulator.
I will try to lay down some practical phenomenon which can be considered as the primary cause of market crash during weekends.
- Low trading volume generation
With the physical reach of customers to their respective banks are closed over weekends, the process of adding more funds to invest from back accounts might be getting hampered. This results in cryptocurrency trading at significant trade size with low volume order increasing the tendency of price momentum.
2. Margin Call
What if the main reason for hitting margin call is not the capacity of adding more funds. Again, the non-working of banks over weekends might lend some trouble to both retail and institutional investors trading on margin. Margin call refers to the repayment of loan situation when the price of digital currency dips below a certain level
3. Crypto ETF
While crypto ETF is being taken as a major step for bitcoin getting adopted as a digital currency to invest in traditional exchanges, the working of the crypto ETFs hasn’t been the same as on the crypto spot market. The ETFs are available to trade only on working days of the week just like a centralized currency ETF. The loophole might be ending in a mismatch with investor’s sentiments to trade getting stuck in the pipeline. However, these potential loopholes are not just ready to be considered. Especially when we are in the phase of formulating a regulatory structure for the functioning of crypto ETFs.
4. Individual influence or so-called “market manipulation”.
The criticism of Elon Musk’s tweets and Tesla’s actions of abandoning bitcoin as a mode of payment did not really stop till now. Tbh, I am not disappointed or having anger about one man holding this much influence in the market. Even, according to my generic thinking, we don’t really have the backing behind the rise and record-breaking rallies of Indian stock exchanges while the nation’s citizens were suffering the wrath of the second wave of COVID-19. Has institution and central authorities made the market a pandemic proof?
Besides, the influence of an individual or a group can be a time-bounded phenomenon. The concern is the radical shift in thinking and working of centralized authorities require to fully facilitate the adoption of digital currency. Can we even imagine a bank open 24/7 facilitating the digital market and its other related aspects of the market? Will the central institutions bend their hands for supporting digital currency
