Bitcoin's "Bore-Out" Moment: When Crypto Catches the Banking Flu

• By Staff Editor
• Jun 30 2024

If you got into crypto for the wild, unpredictable ride, you may want to hop off at this station. Because the once-volatile Bitcoin appears to be morphing into a relatively staid, timid investment before our very eyes. Call it crypto's "bore-out" phase if you will.

New data reveals that Bitcoin's weekend trading volume has plunged to an all-time low of just 16% in 2024. That's barely half the 28% level it commanded back during the white-knuckled crypto mania of 2019. The era of Bitcoin's "Wild Weekends" of yore is officially dead.

What gives? Why is the asset that used to leave traditional bankers utterly bewildered suddenly behaving more like a plain-vanilla stock or bond?

The simplest explanation is that an overdue digital-age milestone - the approval of spot Bitcoin exchange-traded funds (ETFs) by U.S. regulators - is finally dragging the largest cryptocurrency into the milquetoast realm of business hours trading cycles.

Just like stocks and ETFs tracking other asset classes, the new Bitcoin funds can only be traded between the opening and closing bells on traditional equity exchanges. No more wild 3 a.m. weekend price spirals getting ripped on speculative Binance order flow from the Ape Coin fan brigades.

That relentless cash downpour from institutional investors piling into Bitcoin ETFs appears to be subsuming the influence of the old-school individual crypto traders and gamblers who fueled those trademark volatile weekend moves.

The data underscores this new dynamic in action. Bitcoin's weekend trading share has steadily collapsed from its highs as the ETFs gained popularity through 2024. Meanwhile, volumes between 3-4 p.m. ET on weekdays - the so-called "benchmark fixing" window when ETF issuers calculate Bitcoin prices to determine fund values - have surged over 30% compared to year-ago levels.

In other words, Bitcoin is increasingly becoming a derivatives-driven institutional asset tracking the vagaries and opening hours of the stuffy old U.S. stock market. Talk about a vibe shift from its anti-establishment, cypherpunk beginnings!

But the inexorable march of Bitcoin towards blending in with conventional financial markets didn't stop there. The implosion of crypto-friendly banks like Signature and Silvergate in early 2023 delivered another knock to its trading rhythms.

Those two lenders were ground zero for crypto trading desks, exchanges and market makers looking to capitalize on Bitcoin's prior 24/7/365 price cycles. With their instant payment networks shuttered, traders lost a crucial pipeline for real-time liquidity outside of stock market hours.

Suddenly, skeleton crews became the new norm across the crypto markets on nights and weekends. Volume atrophied further as traders gave up fighting an arduous battle to make weekend Bitcoin markets.

The end result of these two driving forces - the ETF-ization and de-banking of Bitcoin over the past 18 months - has been a dramatic collapse in price volatility compared to past peaks. Whereas Bitcoin's epic 2021 surge saw price swings hitting triple-digit levels, its latest record highs earlier this year played out with just a third of that fear factor.

Make no mistake: While concerning for the wide-eyed YOLO crowd, this institutionalization and de-risking of Bitcoin is very much by design for members of the regulatory establishment like Gary Gensler's SEC. Their prime directive has been to tame what they've long considered a feral asset class rife with manipulation and speculation.

So in that respect, Bitcoin's "bore-out" phase can be seen as a win for enforcers seeking to integrate crypto into the tried-and-true framework of rules governing other public markets. Even if it utterly deflates the former crypto mantra of sticking it to the persisting fiat system.

Of course, whether this dramatic reversal of Bitcoin's trading behavior and volatility profile proves permanent or temporary remains to be seen. Regulators and bankers have tried and failed to stuff that crypto genie back into its bottle before. Maybe Bitcoin was simply catching a bad case of the banking flu these past few months.

But for those who entered the cyptersphere chasing the next adrenaline-pumping investment frontier, this new era of bland price action is likely a buzzkill. When Bitcoin starts trading like U.S. Treasuries or Apple stock, you know the revolution has been reined in hard.

Pour one out for crypto's maverick spirit this weekend - it looks like the decentralized asset class just got centralized. A boring future could lie ahead thanks to the ETF-ication of Bitcoin.

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