> ## Content Index
> Fetch the complete content index at: https://fsc.stevens.edu/llms.txt
> Use this file to discover other available public pages before exploring further.

# Bitcoin ETF Approval and Beyond: A Statistical Analysis of Evolving  Crypto Market Dynamics and Emerging Arbitrage Opportunities
- URL: https://fsc.stevens.edu/bitcoin-etf-approval-and-beyond-a-statistical-analysis-of-evolving-crypto-market-dynamics-and-emerging-arbitrage-opportunities/
- Published: 2025-11-12T16:22:35.000Z
- Updated: 2026-05-16T22:35:26.000Z
- Author: Salvatore Matteis
- Tags: 2025 Spring, FE 800 Projects

## **Researcher**

Divy Patel

## **Faculty Advisor**

Prof. Zhenyu Cui

## **Overview**

This study investigates how the spot Bitcoin ETF approval reshaped crypto market dynamics, focusing on Bitcoin (BTC) and Ethereum (ETH). Using rank-based structural break analysis and a Multivariate GARCH-BEKK model, it finds that markets anticipated regulatory approval, showing short-term decoupling but stronger long-term correlation between BTC and ETH.

## **Key Findings**

### **1\. Structural Breaks**

- A major break occurred on October 23 2023, triggered by the DTCC listing of BlackRock’s Bitcoin Trust and the closure of Grayscale’s SEC case—months before the January 2024 ETF approval.
- This date marks a behavioral regime shift in crypto trading activity.

### **2\. Statistical Results**

- Post-break returns show higher mean, lower kurtosis, and smoother volatility.
- Jump volatility (sudden spikes) dropped significantly for BTC and ETH, indicating a more mature and liquid market.
- BTC-ETH correlations became more unstable, occasionally dipping below 0.7, suggesting short-term dislocations.

### **3\. Volatility Dynamics**

- Short-term spillovers weakened (less immediate reaction to each other’s shocks).
- Long-term volatility linkages strengthened, implying deeper structural interdependence.

### **4\. Arbitrage Opportunities**

- A pairs-trading strategy based on regression-error spreads and Hurst-exponent filtering showed:
  - Sharpe ratio rising from -2.6 (pre-break) to 7.0 (post-break).
  - Return on capital improving from -6.7% to +25%.
- The approach remains feasible for retail traders using daily data.

### **Conclusion**

The ETF anticipation period, not the approval itself, caused the major structural shift. Crypto markets now exhibit lower jump risk, higher long-term co-movement, and new arbitrage windows. Future work will integrate momentum overlays to enhance trading robustness.

### **Significance**

This research links regulatory milestones to quantifiable market evolution, demonstrating how structural breaks and volatility modeling can uncover profitable strategies and signal the growing institutional maturity of crypto markets.

###