The Sunday Effect- The idea that cryptocurrency drops in price over the weekend and rebounds after the weekend. So the “Sunday Effect” has been a well know phenomena with Crypto and has been coming up more and more lately. You can even find traders who sell every Friday and buy back every Sunday night and post their returns. What, if anything, does this mean for the future of crypto?
I won’t bore you with the details but as more and more companies petition the SEC for crypto ETFs, idiosyncrasies such as the “Sunday Effect” become important. Since ETFs are traded on an exchange, they are limited to normal business hours. This means any gains or losses that traditional crypto investors take advantage of, would not be available to them. I am writing this and checking prices at 9:21 PM and I have also bought plenty of BTC when I checked the price first thing at 6:00 AM.
“Should the price of Bitcoin abruptly plummet on a Saturday, investors in a Bitcoin ETF would theoretically be trapped in that fund until the market opens on Monday. Should it spike, they’d have to wait to trade for a profit,” Fortune Magazine
There are other concerns that come from this “Sunday Effect” such as the idea that this has become a self-fulfilling prophecy. The more people that sell and buy on this principle the more it will become ingrained in the price of crypto. While in the long run, this may not affect the people HODLING, it does impact the mainstreaming of crypto. How do you mainstream a currency that is worth less on weekends?
Finally, are there some underlying issues with crypto that cause for this weekend dip? Is it a problem that can be solved, or could it just be that crypto traders sell on weekends because they are younger and don’t go by the same rules as older investors? Or, are they just at work and dig into crypto when they wake up on Saturday? Is there a more technical answer based in crypto trading habits or the technology itself? Could astrology be the answer? (Probably not that last one.)
I am not sure the “Sunday Effect” even matters, to be honest. Right now I am thinking more about the correct use of “Effect” vs “Affect” in this post. But really, is this something that we need to address, or is just one more item that distinguishes crypto from fiat, that crypto people have to be paying attention seven days a week, unlike those lazy hedge fund managers?
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