Another wild weekend for cryptos — BTC, ETH and others drop after dip in equities and jobs surge

The crypto market registered a substantial drop over the weekend. Bitcoin fell nearly 5 percent over the last couple of days, going from $24,091 on February 3 to $22,933 at the time of 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 late last night.

The rest of the crypto market also saw a weekend drop, with most coins in the top 100 list flashing red over the last 24 hours. As such, the global crypto market cap also took a tumble, 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 fell 13 percent, 12 percent, and 10 percent over the weekend.

This drop can be attributed to two factors, crypto’s correlation with equities and a job surge in the US. To begin with, the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite Index all ended in the red on Friday, registering 0.4 percent, 1 percent, and 1.6 percent losses, respectively.

Owing to an increasing amount of institutional investors in the crypto space, a drop in the US stock market usually results in falling cryptocurrency prices.

On Friday, the US Bureau of Labour Statistics also revealed that the number of non-farming payroll jobs increased by 517,000 in January. This is much higher than the expected rise of 185,000 jobs. This number is also double the 260,000 jobs added in December 2022. While a rising employment rate might sound like a good thing, it could influence the Fed’s next interest rate hike, which will directly affect crypto prices. With more jobs beings filled, the Fed will be more comfortable increasing the interest rate and this could cause prices to drop.

The latest drop in the crypto market is just one of many wild fluctuations seen over the weekend in the last couple of months. For instance, over the last 30 days, most of the biggest BTC spikes have come on a weekend. For instance, BTC registered gains of up to 5 percent over the last 3 weekends. Similarly, through November and December 2022, when the crypto market was going through a rough patch, most drops also came on weekends.

Several experts have offered different explanations for this intriguing characteristic of the cryptocurrency market. One common reason could be that volume is lower over the weekend and therefore, large transactions tend to move the needle much more than usual. “When the volume is low, the same trade size can move prices a lot more,” 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 dissemination of information on Friday after the markets close so that investors have more time to digest the information over the weekend.

However, since crypto markets are open 24x7 and all days of the week, these announcements tend to trigger price changes over the weekend.

The recently publish jobs data is a classic example of this. The US Bureau of Labour Statistics released the jobs data on Friday evening, which could have caused prices to swing. The stock market closing in the red on Friday also supports this narrative.

“That could be true in the crypto space where people are maybe waiting to release information on a Friday evening so that you have the weekend to digest it. That would be the fundamental explanation for why that’s happening,” said chief investment officer at Kestra Investment Management, Kara Murphy, to Bloomberg.