The turnaround from last autumn’s highs, with prices more than halved, has only partially undermined the overwhelming rally of bitcoin since the pandemic broke out. The number one crypto in the world in these years has been confirmed to be very volatile and there are those who have also noticed very marked trends over the 24 hours of trading daily with the buy that statistically become more intense when Wall Street closes its doors. Jake Gordon di Bespoke Investment Group explains in fact how the strategy of buying the digital currency at the close of the US stock market – at 4.00 pm in New York – and then reselling it at the opening of the following day – at 9.30 am – would have produced earnings of around 270% since the beginning of 2020. But doing the opposite – buying it when the US market opens and selling it when the market closes – yields negative returns.
“Most of Bitcoin’s gains occurred outside normal US equity trading hours,” Gordon writes in a statement. Cryptocurrencies are traded 24/7, and the strategy is entirely hypothetical, in an attempt to show how sensitive the cryptocurrency markets are to movements in US equities. It’s hard to say whether the trend could work that way, Gordon said, even though it appears that there isin correlation with shares be an important factor this year. “It is a more risk averse market. In other words, stocks and cryptocurrencies are higher on the risk spectrum and therefore have fallen hand in hand, ”she said.
Bespoke recently found that Bitcoin tends to rise on weekends, when the stock market is closed, but its intraday pattern from Monday to Friday is very different: it is flat before the market opens, but falls as soon as trading begins. Bitcoin has long been a favorite of weekend traders, who can often take advantage of lower liquidity levels to generate greater price swings.
Analysts pointed out that this year the currency has moved more and more in tandem with US equities, which means that on days when stocks go up, the currency tends to go up as well and vice versa. Both asset classes reacted to changes in Federal Reserve policy. The central bank raised interest rates to cool growth and curb inflation. The S&P 500 was up 0.2% as of 3:16 pm on Monday in New York, while Bitcoin gained 4.5%, coming in at around $ 31,280.
However, the correlation with stocks may not explain why the trend towards after-hours outperformance also occurred when the market had been rallying for the past two years, says Gordon. One explanation is that the post-close strategy spans a longer time frame, “which means there is the potential for more news / catalysts to consider,” he said.
So in 2022, a trader who bought at the open and sold at the close would have lost 30%, according to Gordon, while the reverse would have resulted in an 8% loss.