Bitcoin Liquidity Shifts to the US as Spot ETFs Reshape Crypto Markets

(Bloomberg) — Bitcoin has become easier to trade on US crypto exchanges compared with platforms overseas, a shift in liquidity attributed to the impact of the nation’s new exchange-traded funds for the largest digital asset.

US trading venues on average accounted for almost half of bids and asks within 2% of Bitcoin’s mid-price so far this year, a period that straddles the launch of the US spot ETFs, data from research company Kaiko show.

In 2023 non-US platforms had the lion’s share of Bitcoin market depth based on this metric. A higher number of bids and asks within 2% of the mid-price points to better liquidity, allowing orders to be executed without unduly ruffling prices.

Bitcoin Liquidity Shifts to the US as Spot ETFs Reshape Crypto Markets

Nine US Bitcoin ETFs debuted on Jan. 11, while the more than decade-old Grayscale Bitcoin Trust converted into an ETF the same day. The group — which includes offerings from BlackRock Inc. and Fidelity Investments — has wooed a net $5 billion of investor inflows so far. The anticipation and rollout of the products stoked a doubling in Bitcoin’s price over the past 12 months.

‘Increased Liquidity’

“Bitcoin’s positive price action has been most pronounced during US trading hours as market participants take advantage of the increased liquidity,” especially in the hour running up the 4 p.m. US market close, said Matthew Sigel, head of digital-asset research at VanEck, one of the spot ETF issuers.

Some observers view the spot Bitcoin ETFs as an inflection point, arguing they will widen crypto adoption. Optimists expect digital-asset trading volumes to revive from the stunted levels left after the collapse of the FTX exchange and its sister hedge fund Alameda Research amid the 2022 bear market.

CME Bitcoin Futures Open Interest Jumps Back Toward Record

The impact of the ETFs is already visible. For instance, 57% of Bitcoin trading against the greenback is in US market hours now compared with 48% a year ago, according to Kaiko Senior Analyst Dessislava Aubert.

Open Interest

In the derivatives sector, open interest at Chicago-based CME Group’s Bitcoin futures market is climbing back toward the record level hit when the ETFs won approval. The increase in outstanding contracts is a sign of greater interest in crypto-related exposure and hedging among US institutions.

The new ETFs calculate their net asset value against dedicated benchmarks at the US close each weekday, a process that helps with Bitcoin price discovery.

Bitcoin Trading Volumes Spike at US Close When ETFs Fix NAV |

Such a “transparent and dependable reference point” enables investors to “pool large trades at a designated time,” potentially reducing their impact on the market, said David Lawant, head of research at crypto prime broker FalconX.

Lawant said investors need to watch ETF inflows closely, as “prices are now more likely to recede when buy flows recede.”

Bitcoin was steady at $52,236 as of 7:37 a.m. Wednesday in Singapore, near the highest level in more than two years.

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(Updates with market prices in the final paragraph.)

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