Bitcoin Gains Surge Outside US Trading Hours Post-ETF Launch

Since the launch of spot Bitcoin ETFs, most of Bitcoin's daily gains have occurred outside of U.S. trading hours, presenting opportunities for traders. This trend marks a reversal from the past two years, where gains were typically concentrated during U.S. hours. Analysts suggest investors can capitalize on small profit margins by buying Bitcoin ahead of U.S. trading hours and selling a few hours later.

Bitcoin Gains Predominantly Outside U.S. Trading Hours Post-Spot ETF Launch

Since the advent of spot Bitcoin exchange-traded funds (ETFs), a notable shift has occurred in the temporal distribution of Bitcoin's daily gains, with the majority now accruing outside U.S. trading hours. This trend, which represents a departure from the pattern observed over the past two years, presents potential opportunities for traders who seek to capitalize on the frequent small margins of profit that arise during these periods.

Markus Thielen, a researcher at digital research firm 10x Research, has observed this recent trend and suggests that investors can take advantage of the information by purchasing Bitcoin prior to the commencement of U.S. trading hours and selling a few hours later.

"Traders can take advantage of this information and buy Bitcoin ahead of the US trading hours and sell a few hours later," Thielen explained to Cointelegraph.

On April 4th, Bitcoin witnessed an approximate 2.6% rally outside U.S. trading hours, while price increases during U.S. hours were limited to around 0.6%. Bloomberg ETF analyst Eric Balchunas also corroborated this trend, indicating in an April 5th post on X that "the vast majority of the 40% gains" in Bitcoin since the introduction of spot Bitcoin ETFs on January 11th have transpired outside regular U.S. market trading hours.

U.S. trading hours encompass the operating hours of the New York Stock Exchange (NYSE) and Nasdaq stock exchange, which run from 2.30 pm to 9 pm UTC.

At the time of publication, Bitcoin is trading at $68,400, having experienced a remarkable 64% growth in the first quarter of 2024, as reported by Cointelegraph.

Pre-Market Purchases and ETF Inflows

Thielen attributed the pre-market surge in Bitcoin prices to the anticipation of increased ETF inflows among investors, including those from various time zones.

"We also noticed through our data analysis that Bitcoin tends to rise during the 1-4 hours before U.S. ETFs start trading on that day, a sign that there is likely front running of the ETF flow occurring," he added.

On April 4th, Bitcoin experienced a modest 2.6% increase in the four hours preceding the opening of the U.S. market, rising from $65,593 to $67,308.

Arbitrage and Market Spread

Thielen remarked that U.S. investors tend to capitalize on the market spread between the spot market and the futures market.

"The buying flow during US trading hours appears mostly arbitrage - buying Bitcoin Spot ETFs but selling CME-listed Bitcoin futures as hedge funds pocked the futures premium," Thielen stated.

Historical Precedents and Other Markets

The current trend in Bitcoin gains outside U.S. trading hours is not an isolated phenomenon. In June 2022, two ETF funds, the NightShares 500 ETF and the NightShares 2000 (NIWM), were launched to capitalize on overnight increases in U.S. stocks. However, these products were subsequently discontinued in July 2023 due to the diminished performance caused by off-hours announcements, data releases, and earnings reports.

Prior to the introduction of spot Bitcoin ETFs, it was widely recognized that Asian investors constituted the primary source of selling during Asian market hours. In March 2022, Cointelegraph reported that investors based in Asia generally sold while those in the U.S. and EU acted as buyers in the two preceding years.

Glassnode researcher and report writer "Checkmate" highlighted the consistent bid support provided by U.S. and European investors over the past two years. However, Asian markets typically exhibited weaker buying support during Q1-Q3 of 2021 and were associated with substantial selling pressure.

In conclusion, the recent trend of Bitcoin gains predominantly occurring outside U.S. trading hours presents a unique opportunity for traders to capitalize on frequent small profit margins. This shift, coupled with the insights provided by 10x Research and other analysts, enables traders to make informed decisions and optimize their strategies accordingly.