Never trust the weekends

rypto doesn’t rest on weekends, but the U.S. equity traders are asleep. So what to make of the weekend trading activity?

“Simply put, the weekends have a drop-off in participation by smarter money,” Cantering Clark, a pseudonymous crypto trader and market analyst, said, referring to capital controlled by institutions and professional traders. He explained that there’s a high volume of activity by algorithmic trading bots and market makers (or liquidity providers) during weekends. “The market is less compelling to trade,” he said.

According to a “realized volatility” chart from Genesis Volatility, there’s less volatility on weekends. Generally, traders seek volatility because it opens up opportunities for lucrative trades.

“Weekends in legacy markets such as forex were always known to be thinner. Knowing this, banks would push the market around to force movements. The same thing can be seen in crypto, so for the longest time the idea was that any weekend activity was ‘wrong’ and worth fading,” Clark said.

If bitcoin rises on a weekend, the expectation among traders is often that the market would move down over the week, Clark explained. “‘Never trust the weekend’ is a good thing to remind yourself.”

There’s a great deal of trading activity in DeFi, where traders can tinker with tokens that haven’t been listed by centralized exchanges. But when’s the best time to trade on DeFi, particularly Ethereum?

Transactions on Ethereum cost gas fees, which go up or down in price depending on network use. So that can be a significant factor in optimizing the trade time for traders with smaller portfolios.

In April, 2022, Connor Higgins, a data scientist at Flipside Crypto, told CoinDesk, “If we break down fees by the hour we can see fewer but larger transactions around midnight ET, and more activity around 5 p.m. ET, which used to be the most expensive time to transact.”

“It looks like people have been trying to be clever and transact less around the most active hours of the day. But that just made the less active hours more active and therefore more expensive,” Higgins said, sharing the chart below.

As of October, 2022, a heatmap from Anyblock Analytics shows there’s still a dip in transactions and therefore gas fees on weekends and that the most expensive time is when the U.S. wakes up to trade. This can be seen below as things start to get darker red (more expensive) around 13:00 UTC, which is 9 a.m. in New York.

So if you’re looking to save on gas fees and your trade isn’t time-sensitive, waiting to complete the transaction outside of the hours when the U.S. markets are open is smart.

Because Ethereum runs on a public blockchain, data analytics firms are able to label wallets and track their activities. That also allows them to observe Ethereum-related activity across many centralized exchanges.

According to a top 20 gas spender chart from Nansen, a blockchain analytics firm, trading activity starts to ramp up on both Coinbase and Binance, the two largest centralized exchanges in the world, during the morning hours in the U.S. and peaks at the typical close of business, or early evening.

Yet Nansen’s data journalist Martin Lee pointed out there’s a mirroring trend on the top 20 gas consumer chart that tracks smart contracts in DeFi. Uniswap, the largest decentralized exchange, shows similar time patterns as centralized exchanges.

Although centralized and decentralized exchanges have radically different features (e.g., open order book system versus automated marker makers), they appear to converge around the same time pattern as U.S. trading hours rule them all.