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

Paper: arXiv 2512.12815

Authors: Yihan Hong, Hengxiang Feng, Yinghan Wang, Boxuan Li

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.

Complexity vs Empirical Score

• Math Complexity: 4.5/10
• Empirical Rigor: 6.0/10
• Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper provides a timely empirical analysis of the impact of the January 2024 Bitcoin Spot ETF approval using standard econometric tools like DCC-GARCH and Chow tests. While the mathematical formulations are standard implementations of existing econometric frameworks, the empirical analysis on recent market data offers practical insights for portfolio management.

Research Flowchart

  flowchart TD
    A["Research Goal: Assess impact of January 2024 Spot ETF approval on Bitcoin's hedging properties"] --> B["Data Inputs: Daily prices of BTC, S&P 500, Gold, and US Dollar Index (DXY)"]
    
    subgraph Methodology ["Quantitative Analysis"]
        B --> C["Rolling Correlation Analysis"]
        B --> D["Chow Tests for Structural Breaks"]
        B --> E["DCC-GARCH Modeling"]
    end

    C --> F["Key Findings & Outcomes"]
    D --> F
    E --> F

    F --> G["1. S&P 500: Correlation increased significantly (aligned with equities)"]
    F --> H["2. Gold: Relationship stabilized near zero"]
    F --> I["3. USD (DXY): Maintained consistent negative correlation (fiat independence)"]