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Risk Without Reward? The Introduction of Bitcoin Spot ETFs

Author

Listed:
  • Daniel Pastorek

    (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic)

  • Peter Albrecht

    (Department of Department of Finance and Accounting, Faculty of Business and Economics, Mendel University in Brno, Czech Republic)

Abstract

Our study examines to what extent the introduction of Bitcoin spot exchange-traded funds (ETFs) affected Bitcoin’s properties, including market dynamics, volatility, returns, return distribution, and tracking errors. Using block bootstrap simulations, OLS regression, EGARCH modeling, and non-parametric tests, we find that Bitcoin ETFs increase volatility and downside risk while leaving average returns unchanged. Return distribution shifts, including reduced skewness and kurtosis, suggest partial normalization, typically linked to greater liquidity and market participation. However, unlike traditional ETFs, Bitcoin ETFs introduce fail-to-deliver (FTD) occurrences—previously absent in Bitcoin markets—which mitigate extreme price movements through delayed settlement. Tracking error analysis confirms that spot ETFs more accurately track Bitcoin’s price than futures-based ETFs. These findings offer critical insights into Bitcoin ETFs’ market effects, particularly regarding stability and investor behavior.

Suggested Citation

  • Daniel Pastorek & Peter Albrecht, 2025. "Risk Without Reward? The Introduction of Bitcoin Spot ETFs," MENDELU Working Papers in Business and Economics 2025-99, Mendel University in Brno, Faculty of Business and Economics.
    • Handle: RePEc:men:wpaper:99_2025
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    More about this item

    Keywords

    Bitcoin; ETFs; volatility; market dynamics; FTDs;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics

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