Market Commentary von Patrick Heusser, Crypto Finance AG
Are we going to get the super Sunday we've been waiting for?
A few suspects are lining up quite nicely:
- We have a long weekend ahead of us: low liquidity bank holiday (no fiat movements)
- In the US, COVID-19 cases are again growing exponentially
- Some pre-election shenanigans are possibly going on in the US (which could have an impact on stock market openings on Monday)
- BTC$ has remained in a tight range over the past few weeks (I think the corn (aka bitcoin) is ready for a big move)
My point is this: if you have deep pockets and are looking to move the market, this is the perfect time to do it. We have seen attempts like this in the traditional world, too, especially in emerging markets, when HF came in just before a long weekend or Easter break and put on a reasonable position. The market makers on the investment bank trading desks were scrambling to get out of the risk and already moved the market in favour of the HF. If, over a weekend, any kind of news in favour of the HF position came out, the opening was usually a bloodbath. Even though, fundamentally, nothing had changed, it was just the fact that market makers misquoted the liquidity risk and the hot potato got passed around until risk/reward found its equilibrium.
I think in BTC$, the mispricing of liquidity is even worse compared to what I have experienced at traditional investment bank trading desks. Fair enough, the market does not close and you can react to any event, but looking at the orderbook depth on weekends, there is definitely less liquidity around. Plus, there is the usual issue for market makers: when the market really starts to move, they need to deploy or move capital around, and some of it needs to take normal commercial bank routes, which are obviously not available over the weekend.
This is why I prefer going light on risk in such cases, and try to be opportunistic if a move happens to profit from a mispriced deal, which is then offered at a nice discount to whoever is ready to grab it.