Weekend Liquidity Gaps Create Price Volatility for Bitcoin ETFs

Bitcoin's unique characteristic of being available for trading 24/7 has created an unusual situation for investors who hold it through a spot ETF. These funds, which track the value of Bitcoin and allow investors to buy and sell shares without directly holding the cryptocurrency, have seen significant price gaps on Mondays due to thin weekend liquidity.

The issue arises because while US-listed ETFs have become enormous, with over $77.5 billion in assets at the end of July, they follow a traditional market calendar. The NYSE core session runs from 9:30 a.m. to 4 p.m. ET on business days, providing six and a half hours of deep and consistent trading.

However, Bitcoin continues to trade across global exchanges outside these hours, including weekends. When major geopolitical news breaks during thinner weekend hours, it can cause significant price movements in Bitcoin, which are then reflected in the ETF's share price when trading resumes on Monday.

In July, US spot Bitcoin ETFs saw a $424.7 million outflow on July 13, followed by seven positive sessions, and then recorded a $225.1 million outflow on July 23. They returned to a $233.1 million inflow on July 30, bringing cumulative net inflows to about $51.64 billion.