Bitcoin Financialization and Market Correlation: Evidence from the Spot ETF Era

Abstract

The introduction of spot Bitcoin exchange traded funds in January 2024 marked a significant shift in the accessibility of cryptocurrency to traditional investors. This study examines whether ETF approval altered Bitcoin correlation with equity markets and whether this correlation is asymmetric across market conditions. Using daily return data from August 2020 to June 2026, we estimate rolling correlations, conduct Chow tests for structural breaks, and perform quantile regression at the 10th, 50th, and 90th percentiles. We also compare Bitcoin results to a control group of four cryptocurrencies without ETF approval (Cardano, Litecoin, Polkadot, Chainlink). Results show that Bitcoin equity correlation increased modestly following ETF approval from 0.36 to 0.39 for the S&P 500, though a Chow test indicates no statistically significant structural break. Quantile regression reveals strong asymmetric correlation. During down markets, Bitcoin S&P 500 coefficient reached 1.76 pre ETF compared to 1.07 in up markets. This asymmetry decreased substantially after ETF approval, falling 57 percent for the S&P 500 and 84 percent for the Nasdaq. Control assets exhibited higher overall equity sensitivity than Bitcoin but showed smaller reductions in downside asymmetry. These findings suggest that while Bitcoin remains more sensitive to equity market declines, ETF introduction may have reduced extreme correlation asymmetry, and this effect appears partially specific to Bitcoin rather than representing a general crypto market trend. The differential reduction between Bitcoin and control assets suggests that ETF approval had a unique stabilizing effect beyond general crypto market trends.