The Surge in Bitcoin Liquidity: What Is Driving The Upswing?

A seismic shift is underway in Bitcoin liquidity, particularly on US crypto exchanges, driven by the recent lauch of US-based Exchange Traded Funds (ETFs).

This groundbreaking development, coinciding with a bullish market rally across cryptocurrencies, has fueled a notable surge in Bitcoin's tradability, fundamentally altering the trading dynamics of the digital asset.

Bitcoin liquidity on US crypto exchanges

The significant metamorphosis in Bitcoin liquidity dynamics is tipping the scales in favor of US-based crypto exchanges. In contrast to the past dominance of non-US platforms in Bitcoin market depth, the introduction of US Bitcoin Spot ETFs has triggered a notable reversal of this trend.

Current data reveals that US trading venues now play a pivotal role, accounting for almost half of the bids and asks within a 2% range of Bitcoin's mid-price since the ETF inception.

This surge in liquidity is a game-changer, enhancing trading operational efficiency and ensuring smoother order executions with minimal price fluctuations, offering a more favorable environment for market participants.

How ETFs are impacting market dynamics

The debut of nine US Bitcoin ETFs and the transformation of the Grayscale Bitcoin Trust into an ETF have set off a substantial influx of approximately $5 billion in investor funds since the momentous launch on January 10.

Observations from Matthew Sigel, the head of digital-asset research at VanEck, point out that positive price momentum in Bitcoin is most evident during US trading hours, signaling heightened accessibility to liquidity.

The optimism surrounding Bitcoin ETFs marks a turning point, with enthusiasts envisioning broader crypto adoption.

This sentiment is further supported by the resurgence of digital-asset trading volumes, particularly after subdued levels following the FTX exchange collapse during the 2022 bear market.

The recent upswing in Bitcoin liquidity on US crypto exchanges, driven by the introduction of Bitcoin ETFs, signifies a pivotal moment in the cryptocurrency landscape.

Beyond enhancing trading efficiency, it underscores the increasing confidence of both institutional and retail investors in Bitcoin as a legitimate and promising asset class.

Market metrics and trends

Over the past 24 hours, Bitcoin Futures Open Interest (OI) has registered a 0.69% uptick, reaching 465.68K BTC or $24.41 billion.

According to CoinGlass data, Binance is at the forefront of Bitcoin Futures OI, experiencing a 2.31% surge to 116.30K BTC or $6.10 billion.

As of today (20th Feb 2024), Bitcoin is trading near the $52,712.71 mark, with a remarkable 24.12% surge in the last 24 hours' trading volume, reaching $23.37 billion.

Noteworthy is the fact that Bitcoin has gained nearly 26% in the last 30 days, showcasing its resilience and attractiveness to investors in the current market conditions.

A recent report from CoinShares unveils that digital asset investment products witnessed weekly inflows hitting an unprecedented $2.45 billion.

On a year-to-date basis, these products observed staggering inflows of $5.2 billion, propelling total assets under management to $67 billion, marking the highest figures since December 2021. 

Bitcoin led the charge with over 99% of inflows, while Ethereum also enjoyed significant support. Despite recent disruptions from Solana, other cryptocurrencies such as Avalanche, Chainlink, and Polygon consistently experienced weekly inflows.