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Weekend Bitcoin Slump: Trading Volume Dives After Spot ETF Launch

Weekends go quiet: spot ETFs drain trading activity since January

Recent years have seen a significant shift in Bitcoin trading patterns, particularly during weekends. According to Kaiko, a leading crypto research firm: 

"The share of weekend Bitcoin trading volume has been in decline since 2018 but has dropped considerably since the U.S. launch of spot Bitcoin ETFs in early January." 

This trend highlights a growing disparity in market activity, with weekend trading volumes dwindling from about a quarter of total trades between 2018 and 2021 to just 13% in 2024.

Kaiko points out that this decline is not merely a statistic but a symptom of deeper market changes, stating: 

"The decline suggests worsening liquidity conditions during weekends and could be explained by both increased institutional participation and worsening market infrastructure." 

The mismatch between the non-stop nature of cryptocurrency markets and the traditional operating hours of financial institutions has long been a challenge. This gap has only widened with the advent of institutional investors in the Bitcoin space, who typically operate within regular business hours, leading to reduced liquidity on weekends.

Furthermore, the closure of crypto-friendly banks in the U.S. has exacerbated these liquidity issues, highlighting the fragile interplay between traditional finance (TradFi) institutions and the crypto market. Kaiko's analysis reveals that despite the global reach of cryptocurrency trading, the impact of institutional behaviors and regulatory environments, particularly in the U.S., significantly influences weekend trading dynamics.

Institutional influence and market liquidity challenges

Kaiko's research provides a comparative perspective, noting significant differences between U.S. and offshore exchanges. Specifically, 

"weekend trading remained slightly higher on offshore exchanges such as Binance, HTX, OKX, Bybit, and Upbit," 

where weekend trades accounted for 15% of the volume, in contrast to 11% for U.S. platforms like Coinbase, Kraken, and Bitstamp.

This discrepancy underscores the broader challenge of liquidity management in a market that operates round the clock. Kaiko elaborates on this challenge, pointing out that:

 "managing liquidity on weekends has been a longstanding challenge for exchanges." 

The situation is further complicated by regulatory and operational differences between jurisdictions. 

Kaiko's findings reveal that "poorer liquidity conditions" were observed on Coinbase compared to Binance, with trading costs on Coinbase increasing since the second quarter of the last year, while they decreased on Binance.

The introduction of spot Bitcoin ETFs in the U.S. has paradoxically both contributed to a rebound in Bitcoin liquidity and highlighted the weekend liquidity gap. Kaiko notes: 

"few transfers have been made between the spot Bitcoin ETF issuers and exchanges over the weekends,"