The Global and Local Impact of the Introduction of Bitcoin and Ethereum Exchange Traded Products (ETPs) on Bitcoin and Ethereum Liquidity and Returns

Abstract

On January 10, 2024 (July 23rd, 2024), the Commission approved the listing of eleven (eight) bitcoin-based (Ethereum-based) exchange-traded products (ETPs) in NYSE Arca, Nasdaq and Cboe BZX. Using these approvals as a natural experiment, we employ a program evaluation framework to study the impact of the introduction of crypto-based ETPs on the liquidity of spot bitcoin/Ethereum markets in crypto trading platforms. We use the most recently available blockchain data supplied by Kaiko. The estimation strategy identifies that while the level of liquidity has not changed, that the time series trading pattern has, and that successive returns are more (less) related. However, though returns are on average more correlated we find that the returns in the bitcoin and Ethereum spot market overall show improvements after the introduction of these ETPs globally as compared to before. The findings further shed light on the workings of different aspects of crypto asset markets.