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

Abstract

On January 10, 2024, the Commission approved the listing of eleven bitcoin-based exchange traded products (ETPs) in NYSE Arca, Nasdaq and Cboe BZX. Using this approval as a natural experiment, we employ a program evaluation framework to study the impact of the introduction of bitcoin-based ETPs on the liquidity of spot bitcoin markets in crypto trading platforms. We use the most recently available blockchain data supplied by Kaiko as of early May 2024. 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 related. However, though returns are on average more correlated we find that the returns in the bitcoin 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.