The characteristic patterns of market liquidity and trading activity that typically occur in cryptocurrency markets during weekend periods, often differing significantly from weekday dynamics due to reduced institutional participation and varying retail activity.
Mechanism
Weekend liquidity regimes are frequently characterized by thinner order books, wider bid-ask spreads, and potentially higher volatility compared to weekdays. This is primarily because traditional financial institutions, which contribute substantial liquidity, are less active, leaving more room for retail traders and algorithmic arbitrageurs.
Methodology
Traders adjust their strategies during weekend liquidity regimes by recognizing the altered market structure. This may involve using smaller position sizes, wider stop-losses, or focusing on assets with more resilient liquidity to mitigate the increased risk associated with reduced market depth and potentially more erratic price action.
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