According to Cointelegraph: Bitcoin is increasingly vulnerable to significant weekend price swings as liquidity becomes more concentrated during weekdays, largely due to the influence of spot Bitcoin exchange-traded funds (ETFs) in the United States, according to a recent report by Kaiko Research.

In its August 12 report, Kaiko's crypto analysts highlighted that Bitcoin's liquidity has become increasingly concentrated on weekdays, especially in BTC/USD markets. This shift is partly due to the growing activity of institutional investors and ETFs, which tend to operate more heavily during traditional market hours.

Impact of Weekday Trading on Weekend Volatility

Kaiko noted that Bitcoin's weekend trading volatility has generally declined since 2021. However, the increased focus on weekday trading has heightened the risk of sharp price swings over the weekend, particularly during periods of market stress.

The report pointed out that during the most recent large-scale Bitcoin sell-off on August 5, when Bitcoin dipped below $50,000, there was notable "liquidity fragmentation" across crypto markets. This fragmentation led to price discrepancies between exchanges, particularly smaller and less liquid platforms.

Kaiko observed that during this sell-off, Bitcoin's price moved 14% between the U.S. market close on Friday, August 2, and its reopening on Monday, August 5—behaviour similar to other major sell-offs since 2020. The report emphasized that because crypto markets operate 24/7, sell-offs that begin on a Friday often exacerbate weekend uncertainty, amplifying the impact on prices.

Significant Price Slippage Across Exchanges

Kaiko also reported that a $100,000 Bitcoin sell order during the August 5 sell-off would have led to significant price slippage, varying across exchanges and trading pairs. For example, the Bitcoin/yen pair on Zaif experienced a slippage of up to 5.53%, while the BTC/euro pair on KuCoin saw a slippage of close to 5.5%. On U.S. dollar stablecoin pairs, BitMEX and Binance.US witnessed slippage reaching up to 4% on the same day.

ETFs' Influence on Bitcoin Liquidity

The 11 spot Bitcoin ETFs in the U.S. have attracted $17.3 billion in net inflows since January, currently holding approximately 4.7% of Bitcoin’s total supply. This significant accumulation has given ETFs considerable influence over Bitcoin's liquidity, particularly during weekdays when institutional trading activity is highest.

Kaiko's analysis suggests that as Bitcoin trading becomes more concentrated on weekdays due to ETF activity, the risk of sharp and unpredictable price movements on weekends is likely to increase, especially during periods of market stress. This evolving dynamic underscores the importance of monitoring liquidity patterns and understanding their potential impact on Bitcoin's price volatility.