- ETFs boost Bitcoin trading volumes post-approval, especially around the US market closes.
- Weekdays saw heightened BTC trading activity, contrasting with declining weekend volumes.
- Hong Kong’s ETF impact on Bitcoin volumes was subdued compared to the US, reflecting market dynamics.
The introduction of spot Bitcoin exchange-traded funds (ETFs) in the U.S. and Hong Kong has triggered a significant shift in Bitcoin’s market dynamics, particularly in terms of trading volumes and liquidity, according to a new analysis by Kaiko.
The U.S. Securities and Exchange Commission’s approval of 11 BTC ETFs on January 11 marked a pivotal moment, followed by their launch the next day. Similarly, Hong Kong entered the market with approvals for Bitcoin and Ethereum ETFs in late April.
These developments have prompted a detailed analysis of how these financial products influence Bitcoin’s spot market structure. Research indicates a clear uptick in trading volumes across exchanges included in Bitcoin benchmark reference rates.
Notably, trading activity surged around the U.S. market close, between 3 p.m. and 4 p.m. New York time, coinciding with ETFs’ net asset value (NAV) calculations based on benchmark fixing prices.
The role of benchmarks in BTC ETFs is significant. These benchmarks derive their index prices from aggregated trade data across selected exchanges, including Bitstamp, Coinbase, itBit, Kraken, Gemini, and LMAX Digital. The NAV of each ETF is determined using these benchmark index prices post-market close at 4 p.m. EST, influencing trading behaviors and liquidity dynamics.
Following the approval of ETFs, trading volumes in U.S. markets increased, recovering from earlier lows this year. This recovery was supported by positive economic conditions and expectations of U.S. interest rate reductions, boosting investor confidence.
Comparatively, weekends witnessed a decline in BTC trading volumes, highlighting a shift towards weekday dominance exacerbated by ETF introductions. The concentration of trading activity during U.S. market hours, particularly around the benchmark fixing window, further emphasizes ETFs’ impact on market liquidity and price discovery.
The liquidity profile of U.S.-regulated exchanges, integral to Bitcoin benchmarks, saw notable improvements. Enhanced market depth and increased trading activity during U.S. market opens and closes reflect ETFs’ role in bolstering liquidity conditions. However, bid-ask spreads on major exchanges exhibited mixed trends, initially narrowing post-ETF launch but widening amidst heightened market volatility.
ETFs have positively impacted Bitcoin’s spot market dynamics, increasing trading volumes and liquidity primarily in U.S. markets. The concentration of trading activities around benchmark fixing windows underscores ETFs’ pivotal role in shaping market behaviors.
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