BITCOIN FUTURES ETF: A COORDINATING FACTOR OR INFLUENCED BY THE BITCOIN MARKET?

Abstract

The recognition of Bitcoin ETFs marks a significant milestone in integrating cryptocurrency with traditional finance. Utilizing Bitcoin price data and Bitcoin ETF futures contracts from 2021 to 2024, this study employs the GARCH model and Granger causality tests to examine the relationship between Bitcoin ETF futures and the Bitcoin market. The findings indicate a positive instantaneous impact between Bitcoin and Bitcoin ETFs in both directions. Additionally, while Bitcoin increases Bitcoin ETF price volatility, Bitcoin ETFs help reduce Bitcoin’s volatility. The Granger causality test suggests that past Bitcoin prices can predict Bitcoin ETF prices, but there is no evidence supporting the reverse relationship. The study affirms the leading role of Bitcoin futures in relation to Bitcoin ETFs; however, Bitcoin ETFs contribute to stabilizing the Bitcoin market. Based on these findings, the research provides several policy implications for Bitcoin market regulators, Bitcoin ETFs, and investors.