Bitcoin (BTC) trading volume shows a significant decline over the weekend due to the rise of traditional financial institutions and spot exchange-traded funds (ETFs).
According to data from blockchain analytics platform Kaik, this trend started back in 2018. However, it received an additional boost with the launch of spot Bitcoin ETFs in the US in early January.
Bitcoin weekend trading and liquidity decline
Between 2018 and 2021, about a quarter of BTC trading volume took place on weekends. By 2024, this figure will fall to just 13 percent. This drop in weekend trading suggests a deterioration in liquidity conditions, possibly due to an increase in institutional participation and a deterioration in market infrastructure.
Managing weekend liquidity has always been a challenge for exchanges because “the operating hours of traditional financial institutions do not match the needs of large crypto traders and market makers,” Kaiko said.
US exchanges vs. offshore exchanges
According to Kaiko, the closure of several crypto-friendly banks in the US was a direct indication of declining liquidity over the weekend. Both US and offshore crypto exchanges saw a decline in weekend trading.
Still, weekend trading remained slightly higher on offshore exchanges such as Binance, HTX, OKX, Bybit and Upbit, where weekend trading accounted for 15 percent of total volume, compared to 11 percent on U.S. exchanges such as Coinbase, Kraken and Bitstamp.
The research firm noted that “worse liquidity conditions” were observed over the weekends at US-based Coinbase compared to Binance, as trading fees at Coinbase have increased since the second quarter of last year. Trading costs on Binance, on the other hand, have fallen.
Bitcoin ETF and increasing liquidity
Since the launch of spot Bitcoin ETFs in the United States, BTC liquidity has improved significantly. However, there were few transfers between the providers of these ETFs and the exchanges on weekends. Kaiko concluded that this gap is likely to widen as ETF providers continue to build their BTC holdings.