How to find the “best time” to trade cryptocurrencies?

Unlike traditional markets, cryptocurrency markets are open 24/7, even on public holidays.

The global and constant nature of cryptocurrency trading presents traders with many challenges, one of which is finding the best time to trade.

Those looking to execute large buy and sell orders need to determine the times and volumes when liquidity is greatest. It’s like a grocer with tons of produce to sell, looking to set up his stand in the busiest market with the most tourists.

Liquidity is less of a concern for novice traders or those looking to trade on a smaller scale. However, they may still want to trade on a more established platform, as prices tend to be less affected by large orders or manipulation.

Finding the right time to trade is a challenge not only for spot traders (those who buy and sell assets with immediate delivery), but also for investors in decentralized finance (DeFi) tokens.

Blockchain transaction fees, such as Ethereum’s gas fees, can vary dramatically from one hour to the next, so it’s especially important for beginners with smaller portfolios to keep an eye on these prices, as gas fees are a major contributor to network congestion response, rather than deal size.

For example, someone who wants to trade $100 worth of cryptocurrency may end up paying twice as much gas if they plan to execute the transaction during busy hours.

Until 2021, the Asian influence is so pronounced that Bitcoin bulls worry about the Lunar New Year in February, when miners dump Bitcoin heavily and cause prices to plummet.

But those patterns have changed.

“Now that Wall Street is more closely involved, a lot of the action is moving to the West,” said Mati Greenspan, founder and CEO of investment advisory group Quantum Economics.

There is a wealth of data showing that cryptocurrency trading activity coincides with traditional U.S. market hours, suggesting that cryptocurrency investment has largely shifted from east to west.

“Bitcoin spot volumes tend to peak during U.S. stock market hours, especially at the open,” said William Johnson, an analyst at crypto analytics firm Coin Metrics.

According to the Coin Metrics chart, the correlation with U.S. trading hours is most pronounced in the first quarter of 2022.

“Never Trust Weekends”

So what to do with the weekend trading activity?

“Simply put, there was less engagement from smarter investors over the weekend,” said Cantering Clark, an anonymous cryptocurrency trader and market analyst, referring to the capital controlled by institutional and professional traders.

He explained that there was a lot of activity from algorithmic trading bots and market makers (or liquidity providers) during the weekend. “The market is less attractive to deals,” he said.

Weekends were less volatile, according to Genesis Volatility’s Realized Volatility chart. Generally, traders seek volatility because it provides opportunities for profitable trades.

Clark said, “We know that traditional markets such as foreign exchange can be quieter on weekends. Knowing this, the banks will move the market and drive market volatility. The same can be seen in cryptocurrencies, so for a long time, People agree that any weekend event is ‘wrong’ and deserves to be downplayed.”

Clark explained that if Bitcoin rises over the weekend, traders typically expect the market to fall over the course of the week.

The Best Time to Trade DeFi Tokens

There is a lot of trading activity in DeFi, where traders can sway tokens that are not yet listed on centralized exchanges. But when is the best time to trade on DeFi, especially Ethereum?

Transactions on Ethereum incur gas fees, the price of which rises or falls based on network usage. Therefore, for traders with smaller portfolios, this can be an important factor in optimizing trading time.

Connor Higgins, data scientist at Flipside Crypto, said, “If we break down the fees by the hour, we can see that there are fewer but larger transactions around midnight ET, with more transactions around 5 p.m. ET.”

However, all efforts to optimize Ethereum transaction times, possibly to minimize gas fees, have led to a dilemma.

“It looks like people have been trying to get smarter and trade less during the most active times of the day,” Higgins said. “But that just makes the less active times more active and therefore more expensive.”

Centralized and decentralized trading activity

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

Trading activity on Coinbase and Binance, the world’s two largest centralized exchanges, began to increase during the morning hours in the United States and usually peaked at the close or early evening, according to a chart released by blockchain analytics firm Nansen.

However, Nansen’s data reporter Martin Lee noted that Uniswap, the largest decentralized exchange, exhibits similar temporal patterns to centralized exchanges.

Although centralized and decentralized exchanges have completely different characteristics, they appear to have converged trading patterns during U.S. trading hours.