The Impact of Bitcoin ETF Approval on Bitcoin's Hedging Properties Against Traditional Assets

TL;DR

This paper investigates how the approval of Bitcoin's Spot ETF in 2024 affected its correlations with traditional assets, revealing increased alignment with equities and stable independence from gold and fiat currencies.

Contribution

It provides the first empirical analysis of Bitcoin's changing hedging properties following the ETF approval using advanced statistical models.

Findings

Bitcoin's correlation with S&P 500 increased significantly after ETF approval.

Correlation with gold remained near zero, indicating stable independence.

Bitcoin's relationship with the U.S. Dollar Index stayed negatively correlated.

Abstract

The approval of the Bitcoin Spot ETF in January 2024 marked a transformative event in cryptocurrency markets, signaling increased institutional adoption and integration into traditional finance. This study examines Bitcoin's changing relationships with traditional assets, including equities, gold, and fiat currencies, following this milestone. Using rolling correlation analysis, Chow tests, and DCC-GARCH models, we found that Bitcoin's correlation with the S\&P 500 increased significantly post-ETF approval, indicating stronger alignment with equities. Its relationship with gold stabilized near zero, while its correlation with the U.S. Dollar Index remained consistently negative, reflecting its continued independence from fiat currencies. These findings offer insights into Bitcoin's evolving role in portfolios, implications for market stability, and future research opportunities on cryptocurrency integration into traditional financial systems.