Spot Bitcoin ETFs Shift Trading Patterns, Volatility Sees Notable Decline

The Bitcoin market is undergoing a significant transformation in its trading patterns. Recent data suggests a noticeable change in how the leading cryptocurrency is bought and sold, potentially marking a new era in its development. This shift appears to be bringing Bitcoin more in line with traditional financial markets, impacting trading times, volatility, and overall market behavior.

The introduction of spot Bitcoin exchange-traded funds (ETFs) at the start of 2024 seems to be a key driver of these changes. These ETFs have quickly gained popularity among investors since receiving approval from the U.S. Securities and Exchange Commission.

Spot Bitcoin ETFs Market Dynamics Shift

One of the most notable changes is the significant decrease in weekend Bitcoin trading. Data from cryptocurrency research firm Kaiko reveals that the proportion of Bitcoin traded on Saturdays and Sundays has fallen to just over 15% this year, a substantial drop from its 2019 peak of 28%. This trend, while ongoing for years, has been accelerated by the introduction of Bitcoin ETFs.

The impact of ETFs is further evidenced by a shift in weekday trading patterns. The proportion of Bitcoin traded between 3 p.m. and 4 p.m. which is the benchmark fixing 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 has limited market makers’ ability to use 24/7 payment networks for real-time crypto transactions, further contributing to the decline in weekend trading volume.

Interestingly, the institutional adoption of crypto through Bitcoin ETFs has led to significantly lower price volatility. When Bitcoin last reached record highs in November 2021, volatility surged to almost 106%. In contrast, when Bitcoin hit its all-time high of $73,798 in March 2024, volatility was just 40%. This reduced volatility, which has remained under 50% since the start of 2023, is seen as an indication of Bitcoin maturing as an asset.

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Recent Market Performance and ETF Flows

Despite recent changes in trading patterns and reduced volatility, Bitcoin continues to show strong overall performance. It’s currently trading around $61,000 and is up about 45% year-to-date. However, the cryptocurrency has faced some recent challenges, slipping below the $60,000 mark due to tepid trading in U.S. Spot Bitcoin ETFs.

Interestingly, even as Bitcoin’s price dipped, ETFs have seen positive momentum for four consecutive days. This influx has been largely driven by significant contributions from BlackRock’s IBIT ETF. According to data from Farside Investors, the overall U.S. Spot Bitcoin ETF sector recorded a $73 million influx, with BlackRock’s IBIT ETF receiving a substantial $82.4 million.

This positive flow for BlackRock contrasts with outflows from other major Bitcoin ETFs. GrayScale’s GBTC and Fidelity’s FBTC reported outflows of $27.2 million and $25 million, respectively. However, these outflows were offset by BlackRock’s substantial influx and additional contributions from Ark 21Shares’s ARKB, which saw a $42.8 million influx.

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