Recent data shows that Sunday evening is the best time to buy Bitcoin (BTC) according to Capriole digital asset manager Charles Edwards. As shown below, historically, BTC saw higher returns on Sunday evenings into early Monday morning.
Bitcoin shows higher returns on Sunday evenings. Source: Charles Edwards
“Bored on Sunday at midnight? It just so happens to be the best time to buy Bitcoin.”
There are several reasons Bitcoin might perform better as the weekend comes to an end. First, the weekend typically records a lower volume, which raises the chances of high volatility.
Second, traditional markets that facilitate Bitcoin trades, like CME, close during weekends. As they open, it could cause a spike in volatility.
Reduced BTC trading volume and CME closure are possible reasons
During the weekend, as traditional markets close, trading volume at Bitcoin exchanges also tends to drop off. When there are fewer active traders in the market, it leaves the market vulnerable to more volatile price action.
As an example, on July 25 and 26, the BTC/USDT pair on Binance recorded a daily volume of 40,000 BTC and 65,000 BTC respectively. Then, on July 27, which was a Monday, the volume abruptly surged to 150,000 BTC. Coincidentally, the price of Bitcoin also rose by 11%.
BTC-USD price and volume surge on Monday, July 27. Source: TradingView.com
Due to low Bitcoin trading volume during the weekend, BTC also tends to see sudden pullbacks. For instance, on Sunday, Aug 2, the price of BTC abruptly dropped by 6% overnight. This led to a volume spike, countering the above mentioned data.
The CME Bitcoin futures market and its closure during the weekend could also be impacting Bitcoin’s strong performances on Mondays. Similar to the U.S. stock market, CME closes its markets over the weekend and on national holidays.
Accredited and institutional investors that use the CME Bitcoin futures market have to wait until the market opens on Monday.
Unlike traditional assets, BTC is traded through the weekend and holidays on exchanges. Hence, when CME closes and opens on a Monday, there is usually a gap in price.
The CME gap fill is a theory that is widely recognized within the cryptocurrency market. Data shows that the Bitcoin exchange market usually moves to fill the gap between CME and the rest of the market. Consequently, following a weekend, Bitcoin often sees a major price action.
The monthly close usually brings increased volatility
On Aug 2, when BTC declined by 6% within hours, more than $1 billion worth of futures contracts were wiped out. This coincidentally happened in the closing weekend of July, which is when the CME Bitcoin futures contract closes. The CME futures contract specification reads:
“Trading terminates at 4:00 p.m. London time on the last Friday of the contract month. If this is not both a London and U.S. business day, trading terminates on the prior London and the U.S. business day.”
In recent weeks, the open interest of the CME Bitcoin futures market has significantly increased and this could possibly be a reflection of how CME is increasing its influence over the global Bitcoin market.
It’s also possible that the data is purely coincidental and reduced trading volume on weekends is the primary reason for Sunday’s offering ‘discounted’ Bitcoin prices.