The introduction of spot Bitcoin ETFs into the Bitcoin market is causing changes in trading patterns and reduced volatility.
The trading patterns of the Bitcoin market are enduring a substantial transformation. Recent data indicates that the leading cryptocurrency is experiencing a significant shift in its purchasing and selling practices, which could usher in a new era in its evolution. This change aligns Bitcoin with conventional financial markets, affecting overall market behavior, volatility, and trading periods.
The introduction of spot Bitcoin exchange-traded funds (ETFs) at the beginning of 2024 is a significant factor in developing these changes. Since obtaining approval from the U.S. Securities and Exchange Commission, these exchange-traded funds (ETFs) have rapidly gained popularity among investors.
Market Dynamics Shift in Bitcoin ETFs
The substantial reduction in weekend Bitcoin trading is one of the most notable adjustments. The proportion of Bitcoin traded on Saturdays and Sundays has decreased to just over 15% this year, a significant decrease from its 2019 zenith of 28%, according to data from cryptocurrency research firm Kaiko. The introduction of Bitcoin ETFs has accelerated this trend, which has been in progress for years.
A change in weekday trading patterns serves as additional evidence of the influence of ETFs. The proportion of Bitcoin transacted between 3 p.m. and 4 p.m., the benchmark fixing window for ETFs, has increased from 4.5% in Q4 2023 to 6.7%. In addition, the decline in weekend trading volume has been further exacerbated by the limited capacity of market makers to utilize 24/7 payment networks for real-time crypto transactions, which resulted from the collapse of crypto-friendly institutions in March 2023.
Intriguingly, the price volatility has been substantially reduced due to the institutional adoption of crypto through Bitcoin ETFs. Volatility increased to nearly 106% when Bitcoin’s most recent record high was achieved in November 2021. In contrast, Bitcoin’s volatility was only 40% when it reached its all-time high of $73,798 in March 2024. This decreased volatility, which has remained below 50% since the beginning of 2023, is a sign that Bitcoin is approaching maturity as an asset.
ETF Flows and Recent Market Performance
Despite recent fluctuations in trading patterns and diminished volatility, Bitcoin’s overall performance remains robust. It is trading at approximately $61,000 and has experienced a 45% increase year-to-date. Nevertheless, the cryptocurrency has encountered recent obstacles, including a decline below the $60,000 threshold due to subpar trading in U.S. Spot Bitcoin ETFs.
Intriguingly, ETFs have maintained positive momentum for four consecutive days despite Bitcoin’s price decline. This increase has been substantially fueled by BlackRock’s IBIT ETF-related contributions. The U.S. Spot Bitcoin ETF sector experienced a $73 million inflow, as data from Farside Investors indicated. BlackRock’s IBIT ETF received a substantial $82.4 million.
The outflows from other prominent Bitcoin ETFs starkly contrast the positive flow for BlackRock. GrayScale’s GBTC and Fidelity’s FBTC reported outflows of $27.2 million and $25 million, respectively. Nevertheless, these outflows were partially mitigated by the substantial influx of BlackRock and the additional contributions from Ark 21Shares’s ARKB, which experienced a $42.8 million influx.