The bid-ask spreads on major U.S. exchanges like Coinbase and Kraken have tightened post-spot ETF approvals, indicating enhanced market liquidity and depth, according to analysts at Kaiko.
1. Post-approval, bid-ask spreads for Bitcoin (BTC) have significantly decreased, reflecting improved market liquidity and deeper trading activity.
2. Kraken experienced the highest volatility in spreads during January, reaching a peak of 10 basis points on Jan. 20.
3. Spreads on Bitstamp and Coinbase peaked between Jan. 8 and Jan. 13 at 6.7 and 1.7 basis points respectively, before dropping below 1 basis point recently.
4. The trend extends beyond U.S. markets and Bitcoin, as the average bid-ask spread for the most liquid BTC and Ethereum (ETH) trading pairs has also declined across various crypto exchanges.
5. Coinbase and Kraken witnessed the strongest decline in spreads, while Binance and OKX saw a less pronounced drop.
6. The approval of spot exchange-traded funds (ETFs) is expected to fuel competition among exchanges, with Coinbase already announcing fee waivers for large traders to further reduce spreads.
7. The U.S. Securities and Exchange Commission (SEC) greenlit all spot Bitcoin ETF applications, despite Chairman Gary Gensler's critical stance on cryptocurrencies.
8. Gensler reiterated that the SEC "did not approve or endorse Bitcoin," despite approving spot ETFs.
9. The tightening of bid-ask spreads signals a positive impact on market liquidity and trading efficiency post-ETF approvals.
10. Analysts anticipate increased competition among exchanges and further innovations in trading practices as a result of the ETF approvals.
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