The global and ceaseless nature of cryptocurrency trading poses a number of challenges for traders, one of which is finding the best time to trade. With the market open 24/7, traders must navigate the complexities of liquidity, trading volume, and blockchain transaction fees to optimize their trades.
The Shift in Trading Patterns
Before mainstream adoption began in 2020, crypto trading had fairly straightforward patterns, with Western institutions avoiding crypto and trading concentrated in Asia. However, with the increasing involvement of Wall Street, the action has shifted west[1]. The early Asian session is now considered thin, and some traders suspect that it may be used to manipulate prices.
Correlation with U.S. Trading Hours
Data suggests that crypto trading activity coincides with traditional market hours in the U.S., illustrating a clear evolving trend. Bitcoin spot volume tends to peak during U.S. stock market hours, especially at the opening bell[1]. This correlation was most pronounced in the first quarter of 2022, indicating a significant shift in trading patterns.
The Weekend Effect
Crypto trading doesn’t rest on weekends, but the U.S. equity traders are asleep. This leads to a drop-off in participation by institutional and professional traders, leaving algorithmic trading bots and market makers to dominate the market. The market is less compelling to trade and realized volatility is lower on weekends[1]. Traders often view weekend activity with skepticism, expecting the market to move in the opposite direction during the week.
Best Time for Trading DeFi Tokens
In DeFi, traders can tinker with tokens that haven’t been listed by centralized exchanges. However, when’s the best time to trade on DeFi, particularly Ethereum? Transactions on Ethereum cost gas fees, which vary in price depending on network use. This can be a significant factor in optimizing trade time for traders with smaller portfolios.
Gas Fees and Transaction Patterns
Data from Flipside Crypto shows that transactions on Ethereum are fewer but larger around midnight ET, and more active around 5 p.m. ET, which used to be the most expensive time to transact[1]. However, traders have adapted by transacting less during active hours, making less active hours more expensive. A heatmap from Anyblock Analytics shows a dip in transactions and gas fees on weekends, with the most expensive time being when the U.S. wakes up to trade[1]. Waiting to complete transactions outside of U.S. market hours can be a cost-effective strategy.
Centralized and Decentralized Exchange Activity
Data analytics firms can track Ethereum-related activity across centralized exchanges, showing that trading activity starts to ramp up during morning hours in the U.S. and peaks at the close of business[1]. A similar pattern is observed on decentralized exchanges like Uniswap, the largest DeFi exchange, indicating a convergence around U.S. trading hours.
Conclusion
Finding the right hours to conduct trades is crucial for both spot traders and DeFi investors. While liquidity and trading volume are key considerations, blockchain transaction fees can significantly impact trade costs. By understanding the patterns and trends in crypto trading, traders can optimize their trades and minimize costs. Whether you’re a novice trader or an experienced investor, timing is everything in the world of crypto.
In conclusion, the data suggests that the best time to trade crypto is during U.S. trading hours, when liquidity and trading volume are highest. However, for DeFi tokens, waiting for less active hours can be a cost-effective strategy. By staying informed about market trends and adapting to changing patterns, traders can navigate the complexities of crypto trading and achieve their investment goals.