Narrowing Price Gaps Between Bitcoin and Ethereum Observed on U.S. Crypto Exchanges Following Spot ETF Approvals

The recent approval of spot ETFs has led to tighter bid-ask spreads on major U.S. exchanges like Coinbase and Kraken, indicating improved market liquidity and increased trading activity, according to analysts at Kaiko.

The bid-ask spreads for Bitcoin (BTC), which measure the difference between the highest bid and lowest ask prices, have significantly decreased following the approval, suggesting a better liquidity situation and deeper trading activity.

In a recent research report, Kaiko analysts revealed that Kraken, a U.S.-based crypto exchange, experienced the highest volatility in spreads during January, reaching a peak of 10 basis points on January 20th. Similarly, spreads on Bitstamp and Coinbase also peaked between January 8th and January 13th at 6.7 and 1.7 basis points respectively, before dropping to below 1 basis point in recent weeks.

Kaiko pointed out that this trend is not limited to U.S. markets and Bitcoin alone, as the average bid-ask spread for the most liquid BTC and Ethereum (ETH) trading pairs has also declined across various crypto exchanges.

Analysts predict that the approval of spot ETFs will lead to increased competition among exchanges. Coinbase has already announced fee waivers for large traders, which is expected to further drive down spreads.

It is worth noting that the U.S. Securities and Exchange Commission (SEC) has approved all spot Bitcoin ETF applications. However, Gary Gensler, the head of the U.S. financial regulator, has maintained a critical stance on cryptocurrencies and reiterated that the SEC “did not approve or endorse Bitcoin” despite approving spot ETFs.

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