Uncovering the Patterns of Crypto Trading

By Daanial Ahmad and Irene Aldridge

It’s well known that crypto markets are open around the clock, seven days a week. However, as our new breakthrough research shows, some “peak” trading periods are different from other times. The implications of this analysis are at least twofold:

1) higher trader activity usually results in higher liquidity – after all, according to Demsetz (1968), liquidity IS the trader availability in the markets.

2) low-activity periods are potentially a ripe ground for investors looking to profit by filling in the liquidity with Automated Market Making (AMM)

Varying trader presence is nothing new. It has long been known that liquidity varies with time (exhibits seasonality) in regular markets. For example, Almgren and Chriss (1999) famously documented that the trading volume in the U.S. equity markets has a U-shaped curve, reflecting the high trader presence and activity at the market open and market close, and experiencing a lull around lunchtime. Aldridge (2013) documents that Japanese currency markets nearly stand at a standstill during the Tokyo lunch hour, when most traders take off for their break.

Crypto, due to its decentralized around-the-world nature, may be less sensitive to hourly microstructure differences. However, we found that crypto exhibits interesting patterns during the week.

Figure 1 shows a stylized distribution chart of the absolute number of blockchain transactions recorded in Bitcoin (BTC) from April 24, 2023, to July 1, 2023. The transactions counted here comprise all transactions, such as payment transfers, but also block commits and much more.

As the Figure shows, there are substantive variations around the days of week. Specifically, Sundays, Wednesdays, Thursdays and Saturdays each recorded an approximately similar number of transactions. However, Fridays distinctly stood out with many more transactions, and Mondays and Tuesdays showed the most activity.

What can we infer from this? It appears that the crypto traders tend to trade on Mondays, Tuesdays and, at the end of the week, on Fridays. The seasonality is very clear and visible in the data. Of course, the surf is calling on other days in many exotic locales where successful crypto traders established camps. The interesting implications here, however, is that even when you have full availability of trading at your fingertips, it is human nature to fall into a regular ho-hum rhythm.

Our research is actively in progress. Please feel free to reach out to us for exciting before-the-press inferences and more.

Daanial Ahmad is a Cornell Financial Engineering Student in Manhattan, NYC. He is highly interested in high-frequency trading and can be reached at Daa227@cornell.edu. Irene Aldridge is an instructor at Cornell Financial Engineering Manhattan and CEO of AbleBlox, a crypto research, risk management and trading firm. Irene can be reached at ialdridge@ableblox.com