The traditional Friday afternoon mindset on Wall Street trading desks is undergoing a significant shift. As the week draws to a close, traders are no longer solely focused on mitigating risk until markets reopen on Sunday evening.
With the advent of 24/7 crypto markets, traders can now respond to global events and market fluctuations in real-time, regardless of the day of the week. This paradigm shift is being driven by the growth of perpetual futures contracts, also known as 'perpetuals' or 'perps,' which enable traders to buy and sell derivatives contracts around the clock.
According to Mustafa Al Niama, former head of digital assets at Goldman Sachs, 'From about lunchtime, the desk basically stops thinking about making money and starts thinking about what they can live with for roughly forty-eight hours until the Sunday evening reopen.' The rise of perps has created new opportunities for traders to hedge their positions and manage risk over the weekend, potentially reducing the traditional 'weekend effect' in which traders would often liquidate positions before the close of trading on Friday. Researchers at Energy Aspects note that the dynamics of short-dated West Texas Intermediate crude options are set to change, with the implied volatility of these contracts decreasing on Fridays as traders become more comfortable holding positions over the weekend. While institutional traders have been slow to adopt perps due to concerns over liquidity and infrastructure, the growth of crypto-native firms, proprietary trading shops, and savvy retail traders is driving the market forward.
As the use of perps becomes more widespread, traditional markets may begin to feel the influence of crypto innovations, potentially leading to a more efficient and liquid market. The shift towards 24/7 trading is likely to continue, with CME's Terry Duffy predicting that 'markets will be 24/7 down the road. All markets.' As the financial landscape evolves, one thing is clear: the traditional weekend routine of waiting for markets to reopen is becoming a thing of the past.