The drop comes in the wake of the launch of spot Bitcoin exchange-traded-funds, which appears to have shifted the periods when Bitcoin is traded to be more in line with the schedule of traditional equity exchanges and has lowered its price volatility.
One of crypto’s noteworthy traits is that, unlike stocks, it trades during all hours of the day and even on Saturdays and Sundays. In the past, Bitcoin trading gained notoriety for its “Wild Weekends,” where the digital currency would experience wide price fluctuations.
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But that phenomenon seems to be cooling since Bitcoin’s weekend trading volume has continued to dwindle from its high of 28% in 2019. The launch of Bitcoin ETFs is likely a big reason why.The decline of weekend trading is a “trend that has been going on for years, but has been exacerbated by ETFs,” according to Kaiko Senior Analyst Dessislava Aubert.
BloombergBitcoin ETFs launched with approval from the US Securities and Exchange Commission at the beginning of 2024 and have been a hit with investors ever since, leading the price of Bitcoin to skyrocket to a record high in March. While a portion of those gains have been pared, the largest cryptocurrency is still up about 45% this year to around $61,000.
Unlike most crypto tokens that can be traded anytime on exchanges such as Binance, the Bitcoin ETFs follow the schedule of the traditional stock exchange that they are traded on — which means no weekend trading.
The proportion of Bitcoin traded on weekdays between 3 p.m. and 4 p.m. increased to 6.7% from 4.5% in the fourth quarter of 2023, Kaiko said. That’s the period known as the benchmark fixing window, when the owners of the ETFs determine the price of Bitcoin and then use it to calculate the ETF’s net asset value.
The collapse of the crypto-friendly banks Silicon Valley Bank and Signature Bank in March 2023 is also contributing to lower trading volume on weekends, according to Kaiko.
That’s because market makers can no longer use the banks’ 24/7 payment networks to buy and sell crypto in real time.
“The weekend/weekday gap is likely to persist as market makers, who derive their revenues from large amounts of trades earning the bid-ask spread, are less incentivized to provide liquidity in a low volume environment,” Kaiko’s report states.
The institutional adoption of crypto through Bitcoin ETFs has also led to drastically lower price volatility, according to another report from Kaiko.
When Bitcoin last reached record highs in November 2021, volatility surged to almost 106%. After Bitcoin reached an all-time high of $73,798 in March amid optimism about the ETFs, volatility was just 40%.
BloombergThe trend of lower volatility, and the fact that it has remained under 50% since the beginning of 2023, indicates that Bitcoin is becoming a more mature asset, according to Kaiko.
“While it’s too early to suggest that this is the new normal, changes to Bitcoin’s market structure over the past year may help explain why price action has been relatively ‘boring,’” the report states.