‘The Sunday effect’: Why does crypto tend to crash on weekends?
The “Sunday effect” is a term coined by David G. Blanchflower and Andrew J. Oswald in 2007 to describe the observation that stock market returns tend to be higher on weekdays than on weekends, contrary to the popular belief that the weekend is when trading is dormant.
Crypto tends to crash on weekends because of low liquidity in the market. As soon as people start seeing gains, they want in and then the prices go up even more, which causes an avalanche effect leading to a crash later in the week when everyone is out of cash.
On the weekend, many traders simply take a break from their trading routine and choose not to trade at all.
The Sunday effect is caused by the increased trading volume of stocks and cryptocurrencies, in particular during US trading hours.
The Sunday effect is a theory that coins tend to drop in price on weekends. Also, the weekend effect is a learning process for traders and investors, as according to the theory, the best time to trade and invest is on weekdays.
Many believe that it’s due to traders taking their profits from trading which causes the market to be more volatile. On weekdays, skilled traders can spot trends and make better trades than those who only do it on weekends.
The ‘Sunday effect’ refers to the idea that people tend to sell their cryptocurrency holdings when they are not using them to buy something. This has been observed in Bitcoin and other currencies such as Ethereum and Litecoin.
There is a commonly held theory that the Sunday effect is due to the low liquidity of crypto assets on Fridays and Saturdays. It could be because of increased trading volume, which might lead individuals with smaller accounts to liquidate their positions during low trading days, leading to a sell-off on Sundays.
The Sunday effect can also be attributed to individuals taking profits after a good week or purposeful liquidation of positions due to panicked selling during market corrections.