The Impact of Spot Bitcoin ETFs:
Trading Activity and Volatility Patterns
Kadir Gökhan Babaoğlu, PhD
Volmex Labs
August 30, 2024

Jérémy Pfeifer, CFA
Volmex LabsThis research shows the impact of Bitcoin Exchange-Traded Funds (ETFs) on Bitcoin's trading activity
and volatility patterns, with a specific focus on differences between weekdays and weekends. We analyzechanges in realized and implied volatility pre- and post-ETF introduction. The analysis reveals that
overall trading volume and realized volatility have increased since the launch of Bitcoin ETFs, but thisincrease is predominantly observed on weekdays. Post-ETF weekdays exhibit significantly higher pricefluctuations than weekends, indicating a shift in trading activity towards traditional market hours.
Despite these shifts, the anticipated reduction in implied volatility on weekends post-ETF is notstatistically significant, suggesting stable market risk expectations. These findings highlight how Bitcoin
ETFs are shaping trading behaviors, aligning Bitcoin’s market dynamics more closely with those of
traditional financial markets. Understanding these changes is essential for traders and investors seeking
to optimize their strategies in the evolving cryptocurrency landscape.

Introduction
Bitcoin has long been known for its volatility, with dramatic price swings capturing the attention oftraders, investors, and the media alike. However, the introduction of Bitcoin Exchange-Traded Funds(ETFs) has introduced a new dynamic to the cryptocurrency market, potentially altering trading behaviors
and volatility patterns. Bitcoin ETFs, which allow investors to gain exposure to Bitcoin without directly
purchasing the cryptocurrency, have been seen as a bridge between traditional finance and the digital assetworld. Since the first Bitcoin ETFs began trading, there has been a growing interest in understanding how
they impact the behavior of Bitcoin prices, particularly regarding volatility during different times of theweek.
Traditionally, Bitcoin’s volatility has been a round-the-clock affair, with significant price movements
observed at all hours and on all days, including weekends. This is in contrast to traditional financial
markets, where trading activity typically slows down on weekends when markets are closed. With theadvent of Bitcoin ETFs, questions have arisen about whether this new investment vehicle could bringabout more conventional trading patterns to the Bitcoin market. Specifically, market participants andanalysts have been keen to understand whether the introduction of ETFs has led to reduced volatility onweekends, mirroring the behavior of traditional assets.
This article seeks to explore these questions by analyzing hourly Bitcoin price (BTCUSD) and Bitcoin
Volmex Implied Volatility Index (BVIV) data, along with trading volumes, over a two-year period. Weaim to understand how the launch of Bitcoin ETFs has influenced realized and implied volatility during
weekdays and weekends. By examining data from both pre- and post-ETF periods, we can identify trends
and shifts in market behavior, and gain insights into market expectations for future price movements andhow these expectations may have changed with the introduction of ETFs.
Our analysis not only sheds light on whether weekends have indeed become quieter since the trading ofETFs started but also examines the broader implications for Bitcoin's trading behavior and risk dynamics.
By understanding these shifts, traders and investors can better navigate the evolving landscape of thecryptocurrency market, making more informed decisions about their trading strategies and risk
management approaches.
Following sections cover the data and methodology, as well as the findings of our study. We will discuss
how Bitcoin's realized volatility, implied volatility, and spot trading volumes have changed, comparing
pre- and post-ETF periods. This exploration will provide valuable insights into how the integration of
Bitcoin into more traditional financial instruments, such as ETFs, is shaping the future of cryptocurrency
trading and market behavior. As Bitcoin continues to mature and its market infrastructure evolves,
understanding these dynamics will be crucial for anyone looking to participate in the cryptocurrency
space.

Data and Methodology
To understand how Bitcoin’s price and volatility behavior have changed, we analyzed hourly price andimplied volatility open-high-low-close (OHLC) data from September 20, 2022, to August 26, 2024.
The data sources included Bitcoin price (BTCUSD) data from CoinMarketCap (CMC) and the Bitcoin
Volmex Implied Volatility Index (BVIV) data from Volmex.
We focused on two distinct periods: before Bitcoin ETFs began trading (pre-ETF, up to the end of January
10, 2024) and after they were introduced (post-ETF, starting January 11, 2024).
We constructed several key variables to conduct our analysis:
1. BTC Price Range: This proxies the realized volatility of Bitcoin and is calculated as the highminus the low price, annualized.
2. BTC Trade Volume: This proxies the trading activity of Bitcoin. It is in billion USD.
3. Average BVIV: Represents the implied volatility levels for each hour, calculated using the open
and close levels of the BVIV.

4. BVIV Range: To proxy the realized volatility of the BVIV.
We also categorized the data into two sets: (1) weekday versus weekend and (2) pre-ETF versus post-ETFperiods.
The analysis uses regression techniques to explore how Bitcoin's volatility and trading behavior haveevolved. Below is the template of these regressions:𝑦𝑡 = 𝑐 + β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹
where 𝑦𝑡 is the dependent variable, 𝑐 is the regression constant, β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 is the coefficient for theweekend dummy,1 β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 is the coefficient for the post-ETF era dummy,2 and β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 is thecoefficient for the interaction term3 which controls post-ETF weekends.

Results
BTC Price Range and Trading Volume
To understand how Bitcoin's realized volatility has changed, we regressed the BTC price range on threedummy variables mentioned above:
𝑝𝑟𝑐_𝑟𝑎𝑛𝑔𝑒𝑡 = 𝑐 + β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹

Table 1: BTC Price Range Regression results

Our findings revealed some interesting patterns:●

Weekends have 20.80 points less volatility than weekdays, showing a clear pattern of reduced
price movements on weekends.

Indicates whether the observation is during a weekend
Indicates whether the observation is from the post-ETF period
3
Indicates whether the observation is a weekend in the post-ETF period
12●●Post-ETF era exhibits 25.37 points more volatility than the pre-ETF period, suggesting that
Bitcoin ETFs have increased overall market activity.
Weekends in the post-ETF era show 9.07 points less volatility compared to pre-ETF weekends.

All coefficients were statistically significant, indicating that these observations are robust and not due torandom chance. This suggests that while the introduction of Bitcoin ETFs has increased overall market
volatility, weekends have become relatively calmer.
To support this finding, we also analyzed trading volumes, and regressed the BTC trade volume (in billionUSD) on three dummy variables:
𝑣𝑜𝑙𝑢𝑚𝑒𝑡 = 𝑐 + β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹

Table 2: BTC Trade Volume (in billion USD) Regression results

Our findings are below:●●●

Weekends see 6.70 billion USD less trading per hour than weekdays.
The post-ETF era sees 11.61 billion USD more trading per hour compared to the pre-ETF period.
Post-ETF weekends experience 3.99 billion USD less trading than pre-ETF weekends.

The shift in trading volume towards weekdays in the post-ETF period aligns with the realized volatility
patterns, suggesting that ETF trading has led to more concentrated trading activity during traditional
market hours.

BVIV Levels and Range
Next, we examined the Bitcoin Volmex Implied Volatility Index (BVIV) to understand changes in implied
volatility, which reflects market expectations of future price movements, and regressed the BVIV levels(i.e. average of open and close levels) on three dummy variables as shown below:
𝐵𝑉𝐼𝑉𝑡 = 𝑐 + β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹

Table 3: BVIV Levels Regression results

Results:●●●Weekends have 1.26 points less implied volatility than weekdays, confirming that weekends are
generally less volatile.
Post-ETF period has 3.88 points more implied volatility than the pre-ETF period, suggesting thatthe market expects more price movements post-ETF.
However, post-ETF weekends show only 0.10 points less implied volatility than pre-ETF
weekends, which is not statistically significant.

This indicates that while realized volatility has declined on weekends post-ETF, the market’s expectations(as reflected in implied volatility) have not adjusted in a statistically significant way. It suggests thatoption market participants may be pricing options similarly to pre-ETF weekends, perhaps due to existinghedging and risk management strategies.
Finally, we regressed the hourly BVIV ranges on three dummy variables:
𝐵𝑉𝐼𝑉_𝑟𝑎𝑛𝑔𝑒𝑡 = 𝑐 + β𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑖𝑠_𝑤𝑒𝑒𝑘𝑒𝑛𝑑 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹 + β𝑝𝑜𝑠𝑡−𝐸𝑇𝐹−𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑤𝑒𝑒𝑘𝑒𝑛𝑑 × 1𝑝𝑜𝑠𝑡−𝐸𝑇𝐹

Table 4: BVIV Ranges Regression results

The analysis of BVIV range revealed:●●●Weekends have 21.71 points less realized volatility of BVIV than weekdays, confirming aconsistent pattern of lower weekend uncertainty in BVIV.
Post-ETF era has 13.18 points less volatility than the pre-ETF period.
Interestingly, post-ETF weekends show 8.25 points more volatility than pre-ETF weekends.

This increase in the BVIV range on post-ETF weekends might suggest increased option trading activity
during weekends post-ETF, possibly as market participants engage in more hedging or speculative
activities during these times.

ConclusionOur analysis provides clear evidence that the introduction of BTC ETFs has significantly influenced
trading behavior and volatility patterns within the BTC market. While BTC has always been known for its
volatility, the trading of spot BTC ETFs has added a new layer of complexity to its market dynamics. The
data shows that overall trading volume and realized volatility have increased since ETFs were introduced.
However, this increased activity is more concentrated on weekdays as expected, leading to a noticeable
divergence in volatility patterns between weekdays and weekends.
Before the introduction of ETFs, BTC was already exhibiting significant price movements between
weekday and weekend trading behavior. In the Post-ETF era, our analysis reveals that weekdays now see
considerably higher levels of trading activity and volatility compared to weekends. Specifically, therealized volatility of Bitcoin prices is markedly lower on weekends in the post-ETF era, suggesting that
more trading and significant price movements are happening during traditional market hours. This shift
may be attributed to the influence of institutional investors and more structured trading activities driven
by the introduction of ETFs.
Interestingly, while realized volatility has decreased on weekends post-ETF, we show that the reduction in
implied volatility on weekends is not statistically significant. This suggests that, although trading patterns
have shifted, the market's expectations of future price movements and risk have remained relativelystable. It appears that while ETFs have indeed changed when and how Bitcoin is traded, they haven't
fundamentally altered how market participants price in risk over the weekend. This stability in implied
volatility may indicate that options market participants continue to maintain similar risk management andhedging strategies as before, even with the availability of ETFs.
The introduction of spot ETFs has brought BTC trading patterns closer to those seen in traditional
financial markets, where activity typically peaks during weekdays when markets are open andinstitutional investors are active. This trend aligns with the growing institutional adoption of Bitcoin, asETFs provide a familiar and regulated investment vehicle that bridges the gap between traditional financeand the crypto world. By drawing more traditional market participants into the Bitcoin space, ETFs havehelped to integrate Bitcoin more deeply into the global financial ecosystem.
As Bitcoin continues to evolve and mature, the impact of spot ETFs and other institutional-grade financial
products will likely become more pronounced. Understanding these dynamics is crucial for traders,investors, and analysts who aim to navigate the rapidly changing cryptocurrency landscape. For traders,
recognizing that volatility may be higher during weekdays can inform strategies around timing trades andmanaging risk. For investors, understanding these shifts can help in making informed decisions about
portfolio allocation and diversification.

In conclusion, the spot Bitcoin ETFs has undeniably altered the trading landscape for Bitcoin, bringing
about more structured and traditional trading patterns. The cryptocurrency market is still in its early stagesof integration with traditional financial systems, and as it evolves, new factors will likely influence
trading behavior and volatility. For those actively participating in the market, keeping abreast of thesechanges will be key to maximizing opportunities and minimizing risks.

Appendix
A. BTC Price Range Regression: Full Set of Results

B. BTC Trade Volume Regression: Full Set of Results

C. BVIV Level Regression: Full Set of Results

D. BVIV Range Regression: Full Set of Results