Institutional access and Bitcoin volatility dynamics: evidence from the introduction of a spot Bitcoin ETF (IBIT)

Abstract

This study examines whether the launch of the iShares Bitcoin Trust (IBIT) is associated with a persistent reconfiguration of Bitcoin's second-moment dynamics, extending beyond the short-run announcement effects documented in prior event studies. Using a multi-method empirical framework on daily data from 2020 to 2026 and a sustained twenty-eight-month post-event window, we document a durable transformation of volatility, persistence, and tail risk rather than a transitory announcement response. While Chow, HAC-Wald, Andrews sup-F, and PELT procedures fail to reject mean stability, annualized volatility declines by approximately 19% to 28% across estimators, with close-to-close, Parkinson, and Garman-Klass measures all yielding statistically significant reductions. EGARCH(1,1,1) estimates indicate that the implied half-life of volatility shocks shortens from approximately 45 to 12 trading days, with a complementary GJR-GARCH specification yielding a post-IBIT half-life of approximately 25 days; both specifications point to a substantial acceleration of shock dissipation. Extreme downside exposure, measured by 1% Value-at-Risk and Expected Shortfall, compresses by approximately 44%, with bootstrap inference confirming statistical significance. At the portfolio level, Bitcoin's marginal contribution to tail risk declines by approximately three-quarters at standard allocation weights. Non-parametric ICSS variance-break detection identifies no discrete break within thirty days of the launch, consistent with a gradual regime adjustment rather than an instantaneous structural switch. Robustness tests using weekly returns, exclusion of the April 2024 halving window, and alternative breakpoints confirm the findings. The results contribute to the literature on cryptocurrency risk dynamics by documenting a coincident compression in Bitcoin's second-moment characteristics around the spot ETF era, a pattern distinct from the volatility responses previously documented for derivative-based products. In contrast to short-window event-study evidence, the compression is shown to persist and to extend into the tail of the return distribution and the portfolio risk budget, dimensions outside the scope of an announcement-window design.