In recent weeks, prominent analysts like Ari Paul and Luke Martin have pointed out a notable pattern: since late October, significant Bitcoin price increases have predominantly occurred during U.S. stock market trading hours. This observation has led to widespread speculation that the current Bitcoin rally is being fueled by a new wave of institutional investors—entities that are active during the day and relatively inactive during nights and weekends. To investigate this claim more thoroughly, we analyzed hourly Bitcoin price data to gain a clearer understanding of how price movements correlate with U.S. market hours.
The Narrative of Institutional Adoption
As Bitcoin's price approached the $20,000 mark, one of the dominant narratives explaining its surge has been the influx of institutional investors. The interest from major financial players began to intensify after the mid-March market crash, which affected both cryptocurrency and traditional stock markets amid the spreading COVID-19 pandemic. In the aftermath, institutional curiosity in Bitcoin as a viable asset class saw a significant resurgence.
A pivotal moment occurred in early May when billionaire hedge fund manager Paul Tudor Jones publicly announced his intention to allocate over 1% of his assets to Bitcoin. He explained that he views Bitcoin as an effective hedge against fiat currency inflation, noting that "central banks have openly targeted a 2% annual inflation rate for fiat currencies."
This narrative gained further traction as central banks worldwide increased money printing efforts to mitigate economic distress caused by the pandemic. In August, MicroStrategy, a publicly-traded company with a market capitalization of $1.2 billion at the time, made a bold move by purchasing $250 million worth of Bitcoin as part of its treasury allocation strategy. The company stated that this investment not only provided a reasonable hedge against inflation but was also expected to yield higher returns than alternative investments.
By November, other influential figures like billionaire investors Bill Miller and Stanley Druckenmiller had joined the fray, publicly disclosing their Bitcoin holdings and endorsing the cryptocurrency. Both compared Bitcoin to gold, with Miller adding that he believes inflation is "making a comeback" due to the Federal Reserve's "manipulation of the money supply."
Weeks later, a senior analyst at Citibank made headlines by predicting that Bitcoin could reach over $300,000, referring to it in a leaked note to institutional clients as "gold for the 21st century."
Beyond individual investors and analysts, payment service providers have also increased their involvement in the crypto market. On October 8, Square announced a $50 million investment in Bitcoin. Shortly after, on October 21, PayPal officially revealed plans to allow its customers to buy, hold, and sell select cryptocurrencies directly within their PayPal wallets. Notably, Bitcoin was trading around $12,850 on October 21 and has since risen to above $19,000.
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Analyzing Hourly Price Movements During U.S. Market Hours
Our analysis focuses on the period from early November, shortly after PayPal's announcement, to when Bitcoin began its ascent toward $20,000. Building on charts originally shared by Luke Martin, we examined Bitcoin's hourly price movements and specifically highlighted the periods when the New York Stock Exchange was open (shown in green). Times when the stock market was closed—such as nights, weekends, and the Thanksgiving holiday—were left unhighlighted.
The results were mixed. There were instances of significant price movement overnight, with the most prominent example occurring on November 5. However, overall, the data indicates that over the past month, Bitcoin's price increases during U.S. market hours were more substantial than those during off-hours. On average, Bitcoin's hourly gains during market hours were approximately 0.1%, compared to about 0.04% during periods when the market was closed.
An interesting deviation was observed during the weekends of November. While the price moved sideways during the first three weekends, the final weekend saw a significant rally. This surge followed a substantial drop on Wednesday evening, November 25, and throughout Thanksgiving. This volatility may be related to the large CME Bitcoin futures gap that existed at the end of the month. When the market reopened on Monday, November 30, Bitcoin's price rose sharply.
Source: Coin Metrics Reference Price
Contrasting with the 2017 Bull Run
For context, it is useful to compare the current price action with that of November 2017, when Bitcoin was in the midst of a bull run that took it to its then-all-time high. During that period, price movements were more dispersed and less concentrated within U.S. market hours. Specifically, November 2017 saw increased trading volume and volatility during off-hours and weekends. The average hourly gain during U.S. market hours was approximately -0.13%, while the average during off-hours was about 0.11%.
Source: Coin Metrics Reference Price
It is important to note that comparing two individual months provides a relatively small sample size and does not necessarily yield definitive conclusions. However, the emerging evidence does suggest a shifting dynamic, potentially indicating increased institutional participation. Further investigation and deeper research are warranted to confirm these observations.
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Frequently Asked Questions
What does institutional adoption mean for Bitcoin?
Institutional adoption refers to large entities—such as hedge funds, publicly traded companies, and payment providers—investing in or utilizing Bitcoin. This can lead to increased liquidity, reduced volatility, and greater mainstream acceptance of Bitcoin as a legitimate asset class.
How do U.S. market hours affect Bitcoin's price?
Bitcoin trades 24/7, but price movements can be influenced by traditional market hours because institutional investors often execute large trades during these times. Increased activity during U.S. market hours may indicate stronger institutional involvement.
Is Bitcoin a good hedge against inflation?
Many investors view Bitcoin as a hedge against inflation because its supply is limited and predictable, unlike fiat currencies, which can be printed in unlimited quantities by central banks. High-profile investors like Paul Tudor Jones have publicly endorsed this view.
What caused the price spike in late November 2020?
The price spike in late November appears to be influenced by a combination of factors, including positive news from companies like PayPal, increased institutional interest, and technical market factors such as the closing of futures gaps on the CME.
How does Bitcoin's current price action compare to 2017?
Unlike 2017, when significant price movements often occurred during off-hours and weekends, recent data suggests that major gains are now happening more frequently during U.S. market hours. This may reflect a shift from retail-driven to institution-driven market dynamics.
Should retail investors follow institutional moves?
While institutional involvement can signal growing asset credibility, retail investors should conduct their own research and consider their risk tolerance. Cryptocurrency investments remain volatile, and past performance is not indicative of future results.