The crypto market experienced a dip over the weekend, with most cryptocurrencies in the top 100 list blinking red for the past 24 hours.
The crypto market recorded a substantial drop over the weekend. Bitcoin fell nearly 5 percent in the past few days, dropping from $24,091 on February 3 to $22,933 as of this writing. It's a similar story with Ethereum too. The second-largest cryptocurrency fell nearly 3.70 percent over the weekend, dropping from $1,686 on Saturday to $1,623 last night.
The rest of the crypto market also saw a dip over the weekend, with most coins in the top 100 list blinking red for the past 24 hours. As such, the global crypto market capitalization also plunged, falling from $1.11 trillion on February 3 to $1.07 trillion at the time of writing. That's a 2 percent drop in just three days. The biggest losers over the weekend were Fantom (FTM), Lido (LDO) and Aptos (APT), which all fell 13, 12 and 10 percent over the weekend.
This drop can be attributed to two factors, the correlation of cryptocurrencies with stocks, and an increase in employment in the US. For starters, the Dow Jones Industrial Average, S&P 500 Index, and Nasdaq Composite Index all ended in the red. on Friday, posting losses of 0.4%, 1% and 1.6%, respectively.
Due to an increasing number of institutional investors in the crypto space, a drop in the US stock market typically results in a drop in cryptocurrency prices.
On Friday, the US Bureau of Labor Statistics also revealed that the number of nonfarm payroll jobs increased by 517,000 in January. This is much higher than the expected increase of 185,000 jobs. This number is also double the 260,000 jobs added in December 2022. While a rising employment rate may sound like a good thing, it could influence the Federal Reserve's next interest rate hike, directly affecting cryptocurrency prices. With more jobs filled, the Federal Reserve will feel more comfortable raising the interest rate and this could cause prices to fall.
The latest crash in the cryptocurrency market is just one of many wild fluctuations seen over the weekend in recent months. For example, during the last 30 days, most of the largest spikes in BTC occurred on a weekend. For example, BTC posted gains of up to 5 percent over the past 3 weekends. Similarly, until November and December 2022, when the crypto market was in a rough patch, most of the crashes also occurred on weekends.
Various experts have offered different explanations for this intriguing feature of the cryptocurrency market. A common reason could be that volume is lower over the weekend and therefore large trades tend to move the needle much more than usual. โWhen volume is low, the same trade size can move prices a lot more,โ said Amin Shams, a finance professor at Ohio State University.
Other experts point to the "overnight effect" often seen in stocks. This refers to the release of information on the Friday after the markets close so that investors have more time to digest the information over the weekend.
However, since crypto markets are open 24/7 and every day of the week, these announcements tend to trigger price swings over the weekend.
Data from recently published jobs is a classic example of this. The US Bureau of Labor Statistics released labor data late Friday, which could have caused prices to swing. The stock market close in the red on Friday also supports this narrative.
โThat could be true in the crypto space where people might be waiting to post information on a Friday night so you have the weekend to digest it. That would be the fundamental explanation for why that is happening,โ Kara Murphy, chief investment officer at Kestra Investment Management, told Bloomberg.
