Cryptocurrency research firm Kaiko’s data shows that the proportion of Bitcoin trading on weekends has dropped to a historic low of 16% this year. This decline occurred after the launch of a Bitcoin exchange-traded fund (ETF), which appears to have altered the timing of Bitcoin trading to better align with traditional stock exchange hours and reduce Bitcoin price volatility.
A notable feature of cryptocurrencies is that, unlike stocks, they can be traded around the clock, including on Saturdays and Sundays. In the past, Bitcoin trading was notorious for its “wild weekends,” during which the price of digital currencies would fluctuate significantly. However, this phenomenon appears to be cooling off, as Bitcoin weekend trading volume has steadily declined from its peak of 28% in 2019. The introduction of Bitcoin ETFs may be a significant factor in this trend.
Dessislava Aubert, a senior analyst at Kaiko, stated that the decline in weekend trading volume is “a trend that has been present for many years, but ETFs have exacerbated this trend.”
In early 2024, Bitcoin ETFs were approved by the U.S. Securities and Exchange Commission and have since been embraced by investors, leading to a surge in Bitcoin prices to historic highs in March. Although some of these gains have been reduced, the largest cryptocurrency has still risen by about 45% this year, reaching around $61,000.
Unlike most cryptocurrencies that can be traded at any time on exchanges like Binance, Bitcoin ETFs follow the traditional trading hours of securities exchanges, which means there is no weekend trading. The proportion of Bitcoin traded between 3pm and 4pm on weekdays has increased from 4.5% in the fourth quarter of 2023 to 6.7%. This period is known as the benchmark pricing window, during which ETF owners determine the price of Bitcoin and use it to calculate the net asset value of the ETF.
The decrease in weekend trading volume was also attributed to the collapse of crypto-friendly banks Silicon Valley Bank and Signature Bank in March 2023, as market makers could no longer use the banks’ 24/7 payment networks to buy and sell cryptocurrencies in real time.
A report suggests that the price difference between weekends and weekdays may persist, as market makers rely on high trading volumes to earn profits from the bid-ask spread, and their incentive to provide liquidity is lower in low-volume environments.
Another report from Kaiko indicates that the institutional adoption of cryptocurrencies through Bitcoin ETFs has also significantly reduced price volatility. When Bitcoin last hit a historic high in November 2021, the volatility surged to nearly 106%. However, after the positive reception of ETFs, the volatility dropped to 40% in March following Bitcoin’s new high of $73,798.
The trend of lower volatility, along with the fact that it has remained below 50% since early 2023, suggests that Bitcoin is becoming a more mature asset. While it may be too early to say that this is the new normal, the changes in the Bitcoin market structure over the past year may help explain why price movements are relatively “boring.”