Weekend Bitcoin Trading Volumes Decline Amid Greater Institutional Engagement and Liquidity Challenges
Summary:
Declining weekend trading volumes of Bitcoin are linked to greater institutional participation and correspondingly reduced weekend market liquidity, according to cryptocurrency research firm Kaiko. This issue further contrasts the operational hours of traditional and cryptocurrency financial markets. While offshore exchanges maintain relatively better weekend volumes, U.S-based exchanges like Coinbase have poorer weekend liquidity conditions compared to Binance. Despite overall Bitcoin liquidity bouncing back with the launch of U.S spot Bitcoin ETFs, fewer transfers are seen between ETF issuers and exchanges over weekends.
Weekend trading volumes in Bitcoin (BTC) have suffered a consistent decline year by year, a factor attributed to heightened institutional engagement in Bitcoin and a resultant lack in liquidity during weekends, reveals Kaiko, a cryptocurrency research agency. A significant 25% of the Bitcoin trading volume could be traced to weekends between the years 2018 and 2021, but this number has taken a dip to a mere 13% in 2024, as noted by Kaiko in their statement on February 26. They pointed out that the compromising liquidity conditions over weekends could be due to both enhanced institutional involvement and an under par market infrastructure.
They produced data indicating the percentage of weekend trade volumes for Bitcoin, based on statistics from January 1 to February 20, 2024.
Exchanges have historically struggled with managing liquidity over weekends, since the operational hours of conventional financial institutions are at odds with the round-the-clock trading in the cryptocurrency sphere. This includes the large-scale crypto traders and market makers, Kaiko added.
This phenomenon was highlighted when several cryptocurrency-friendly banks in the U.S. ceased operations, according to Kaiko's observations.
The research firm found that the reduction in weekend trading was felt across both domestic and offshore exchanges. Offshore exchanges such as Binance, HTX, OKX, Bybit, and Upbit, however, maintained slightly higher trading volumes over the weekend. Weekend trades made up 15% of the total volume at these offshore exchanges, in contrast to the 11% at American exchanges like Coinbase, Kraken, and Bitstamp.
Kaiko found that the Coinbase exchange, based in the U.S., featured weaker liquidity conditions as compared to Binance during the weekend.
There has been a significant recovery in Bitcoin liquidity, following the introduction of spot Bitcoin exchange-traded funds (ETFs) in the U.S., Kaiko points out. However, the firm has seen only a limited number of fund transfers between spot BTC ETF issuers and trading platforms during the weekend. The research company suggests that this gap might expand with continued growth in Bitcoin holdings by ETF issuers.
Published At
2/28/2024 7:42:17 AM
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