Witching Hours for Traders: Inside Crypto’s Late-Night Liquidation Spikes

Core Insights - The crypto market operates 24/7, leading to potential risks for traders who may find their positions affected overnight due to global trading dynamics [2][3][4] - A recent event highlighted the volatility of the market, with nearly $20 billion in open interest liquidated in a short period, emphasizing the dangers of overnight exposure [4] - Weekend trading is particularly unpredictable, with Bitcoin and altcoins experiencing exaggerated price movements, often 2-3 times more volatile than during weekdays [8] Market Dynamics - The crypto market's continuous operation means that while U.S. traders rest, Asian traders are active, leading to liquidity peaks and potential price swings [3][4] - Automated trading strategies are recommended to mitigate risks associated with low liquidity and sudden market movements during off-peak hours [4][5] - Some traders exploit the volatility during specific hours, particularly around midnight ET, to capitalize on predictable price dislocations [5] Weekend Volatility - The weekend period is marked by low market participation, which increases volatility, making it a risky time for trading [6][7] - Institutional inflows decrease when traditional markets are closed, contributing to the unpredictable nature of weekend trading [8] - Competing studies suggest that there is no substantial evidence to support the notion that weekend prices are more volatile than those on weekdays, indicating a need for further analysis [9]