Most of Bitcoin Pandemic Gains Came While Stocks Were Closed

Most everyone knows that Bitcoin had a stellar two years when the pandemic broke out. But just about all of the coin’s gains since then have happened while US markets are closed.

A strategy that buys the coin at the equity-market close -- at 4 p.m. in New York -- and sells it at the next day’s open -- at 9:30 a.m. -- would have yielded gains of roughly 270% going back to the start of 2020, according to Jake Gordon at Bespoke Investment Group. But doing the opposite -- buying it at the US market open and selling it at the close -- spits out negative returns.

“The bulk of Bitcoin’s gains have come outside of regular trading hours for US equities,” wrote Gordon in a note.

Cryptocurrencies trade 24/7 and the strategy is hypothetical, an attempt to showcase just how sensitive crypto markets are to moves in US equities. And it’s difficult to say why the trend might work this way, said Gordon, though it appears the correlation to equities is a big factor this year. “It’s a more risk-averse market. In other words, stocks and cryptos are higher up on the risk spectrum, thus have sold off hand in hand,” he said.

Bespoke recently found that Bitcoin has largely tended to move higher on weekends, when the stock market is closed, but that Monday through Friday, its intraday path looks much different: it trades flat before the market open, but declines as soon as trading commences. Bitcoin has long been a favorite of weekend traders, who can often benefit from lower levels of liquidity to generate bigger price swings.