Digital Assets: Memorial Day Weekend Could Be Highly Volatile For Crypto (Fundstrat)

May 27, 2022 | Digital Assets, News
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Things “could get weird” and there could be outsized price swings.

Sean Farrell, head of digital asset strategy at financial research firm Fundstrat, has advised crypto investors to keep a low profile and hedge their holdings against heightened volatility due to low trading volumes. (Fortune)

Deja Vu

Farrell recalls that crypto trading volume declined 43% and 35% respectively on the Memorial Day weekends in 2020 and 2021, principally due to institutional traders taking the weekend off. With crypto traders already licking their wounds from an onslaught by bears since November 2021 (bitcoin is down 58% since then), this weekend could heap more pain.

“The takeaway here is that liquidity is likely to be extremely low this weekend and during most holidays thereafter, which could result in outsized price swings,” Farrell writes in the report.

The mix becomes more toxic given the added leverage from the increased number of futures contracts now available with bitcoin as the underlying.

The leverage could extend whipsaw moves in either direction.

Fundstrat advice: Buy put protection on long-crypto positions and reduce exposure to the more speculative altcoins.

Bitcoin poised precipitously

Meanwhile, at the time of writing, bitcoin is trading at $28,438 and on the weekly chart below it is clearly seen in the circle that it has violated the support line at $28,741.

 

 Also it appears that bitcoin has broken down and away from its hitherto correlated moves with tech. While the Nasdaq is up nearly 3% today, bitcoin is down almost 4%.

It is entirely possible that this weekend could see bitcoin gathering further downside momentum and hurtling down in the direction of the next support at around $20,000.

Related Story: Bitcoin Looking Weak At $32,670; May Test $29K

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