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Does the introduction of US spot Bitcoin ETFs affect spot returns and volatility of major cryptocurrencies?

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  • Babalos, Vassilios
  • Bouri, Elie
  • Gupta, Rangan

Abstract

This paper provides the first empirical evidence of whether the introduction of US spot Bitcoin ETFs affected the returns and volatility of major cryptocurrencies. Using data from December 18, 2017 to March 15, 2024, we apply an event-study methodology within a GARCH-based framework. Our results reveal a significant effect of the introduction of spot Bitcoin ETFs on cryptocurrency returns and volatility. The analysis shows a positive impact for Bitcoin, Ethereum, and Litecoin spot price returns around the event date. The volatility of Bitcoin and Ripple spot markets decreased following the introduction of spot Bitcoin ETFs, which supports the stabilization hypothesis for these two cases. We also examine the volatility spillovers using a wavelet coherence approach, and reveal significant volatility spillovers from Grayscale Bitcoin ETF to Bitcoin futures and to a lesser extend to the Bitcoin spot market. Our findings enhance the limited understanding of the price discovery and functioning of the cryptocurrency markets, which could be useful for investors, regulators, and policymakers.

Suggested Citation

  • Babalos, Vassilios & Bouri, Elie & Gupta, Rangan, 2025. "Does the introduction of US spot Bitcoin ETFs affect spot returns and volatility of major cryptocurrencies?," The Quarterly Review of Economics and Finance, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:quaeco:v:102:y:2025:i:c:s106297692500047x
    DOI: 10.1016/j.qref.2025.102006
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    Keywords

    US spot Bitcoin ETF introduction; SEC approval; Cryptocurrency spot returns and volatility; Event study; GARCH-X models;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G00 - Financial Economics - - General - - - General

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