Spot Bitcoin ETFs Change Trading Patterns, See Notable Drop in Volatility
The Bitcoin market is undergoing a significant transformation in trading patterns. Recent data shows a noticeable change in the way the leading cryptocurrency is traded, potentially signaling a new era in its development. This shift appears to affect trading times, volatility, and overall market behavior, bringing Bitcoin more in line with traditional financial markets.
The launch of spot Bitcoin exchange-traded funds (ETFs) in early 2024 appears to be the primary driver of these changes. These ETFs have rapidly gained popularity among investors after receiving approval from the U.S. Securities and Exchange Commission.
Spot Bitcoin ETFs Market Dynamics Change
One of the most notable changes is the significant drop in Bitcoin trading over the weekend. Data from crypto research firm Kaiko shows that the percentage of Bitcoin traded on Saturday and Sunday has fallen by just over 15% this year, a significant drop from the 2019 peak of 28%. This trend has been ongoing for years and has accelerated with the introduction of Bitcoin ETFs.
The impact of ETFs is further evidenced by the shift in weekday trading patterns. The rate of Bitcoin traded between 15:00 and 16:00, the reference pegging window for ETFs, has increased from 4.5% in Q4 2023 to 6.7% currently. Additionally, the collapse of crypto-friendly banks in March 2023 limited the ability of market makers to use 24/7 payment networks for real-time crypto transactions, further contributing to the decline in weekend trading volume.
Interestingly, institutional adoption of cryptocurrency through Bitcoin ETFs has led to a significant reduction in price volatility. The last time Bitcoin reached record highs in November 2021, volatility rose to almost 106%. In comparison, when Bitcoin reached its all-time high of $73,798 in March 2024, volatility was only 40%. This decreasing volatility, which has remained below 50% since the beginning of 2023, is seen as an indication that Bitcoin is maturing as an asset.
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Current Market Performance and ETF Flows
Despite recent changes in trading patterns and reduced volatility, Bitcoin continues to show strong overall performance. It currently trades around $61,000, up nearly 45% year-to-date. However, the cryptocurrency has faced some recent challenges, falling below $60,000 due to rapid trading in U.S. Spot Bitcoin ETFs.
Interestingly, even as the price of Bitcoin fell, ETFs maintained positive momentum for four consecutive days. This influx was largely driven by significant contributions from BlackRock’s IBIT ETF. According to data from Farside Investors, the overall US Spot Bitcoin ETF sector recorded an inflow of $73 million; BlackRock’s IBIT ETF received a significant $82.4 million.
This positive flow for BlackRock contrasts with outflows from other major Bitcoin ETFs, with GrayScale’s GBTC and Fidelity’s FBTC reporting outflows of $27.2 million and $25 million, respectively. However, these outflows were offset by significant inflows from BlackRock and additional contributions from Ark 21Shares’ ARKB, which saw an inflow of $42.8 million.
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