The volume of Bitcoin trading and liquidity are reportedly gathered on weekdays, partly because of the Bitcoin ETFs impact which is probable to boost price volatility on weekends.
Boosted Weekday Liquidity
According to Kaiko Research, Bitcoin has reportedly become massively susceptible to huge price movements during weekends ever since the spot Bitcoin ETFs came in the United States. In a report from August 12, 2024, Kaiko’s analysts allegedly saw that Bitcoin’s liquidity has aggregated on weekdays, specifically within BTC/US dollar markets. The report also denoted a pattern where Bitcoin’s trading volumes over weekends have normally dropped down since 2021. This downturn coincides with the expansion of institutional and ETF activity in the market.
Additionally, Kaiko stated that the growing movement to weekday Bitcoin trading exacerbates the risk of stark ups and downs in the price during weekends, especially when the market undergoes stress. The report states that while weekend trading volatility has declined overall, the consolidation of trading activity on weekdays has augmented the potential for more enunciated price fluctuations during weekends.
Impact of Recent Sell-Off
During a note-worthy Bitcoin sell-off reported on August 5, 2024, when Bitcoin’s price dropped below $50,000, Kaiko allegedly saw “liquidity fragmentation” in the crypto arena. This segmentation caused price inconsistencies across multiple exchanges, significantly impacting smaller and less liquid exchanges. The report expanded on how Bitcoin’s price moved 14% between the US market close on Friday, August 2, and its reopening on Monday, August 5. This movement in price was the same as major sell-offs since 2020, highlighting the effect of weekend liquidity concerns on Bitcoin’s price stability.
Crypto markets are operational each day of the week, unlike conventional financial markets that are closed over weekends. This regular schedule without a halt shows that the sell-offs beginning on Fridays can take a worse turn over the weekend, adding to more uncertainty and augmenting price impacts. Kaiko’s analysis reportedly shows that during the recent sell-off, Bitcoin’s price fluctuation was like the movements seen during the US banking crisis in early 2023.
Additionally, the report expanded on the effect of massive sell orders on Bitcoin’s price downturn. For instance, an alleged $100,000 Bitcoin sell order during the August 5 sell-off would have led to a notable price downturn following the exchange and trading pair. The Bitcoin/yen pair on Zaif underwent a decline of up to 5.53%, while the BTC/euro pair on KuCoin saw slippage nearing 5.5%. Contrarily, stablecoin pairs like the ones on BitMEX and Binance.US saw a slippage of up to 4% on the same day. This diverse downturn shows the impact of market dynamics and liquidity on Bitcoin’s price stability across multiple trading platforms.
Role of Bitcoin ETFs
From the start of 2024, the 11 spot Bitcoin ETFs in the United States have gained a reported $17.3 billion in net inflows, according to news sources. These ETFs presently have around 4.7% of Bitcoin’s total supply, hence, exercising quite an impact on Bitcoin’s liquidity. This concentration of Bitcoin by ETFs has caused a massive accumulation of trading activity during weekdays. Consequently, the liquidity available on weekends has declined, increasing the impact of market stress and adding to more obvious price fluctuations during this period. The increasing dominance of these ETFs highlights their role in designing Bitcoin’s market environment and volatility.
Conclusion
The introduction and growth of Bitcoin ETFs have notably changed the Bitcoin trading environment. The consolidation of liquidity and trading activity during weekdays, along with the continuous operation of cryptocurrency markets, has increased the potential for more volatile price fluctuations on weekends. As Bitcoin attracts more institutional investment with the help of ETFs, comprehending these patterns and their influence on market behaviour becomes integral for investors and analysts alike.
