Bitcoin ETFs Have Not Made BTC a Safe Haven

The approval of US spot Bitcoin exchange-traded funds (ETFs) marked one of the biggest milestones in Bitcoin’s history.

With this approval, the cryptocurrency got a seat at the mainstream finance table. For the first time, institutional investors gained exposure to Bitcoin through a familiar and regulated product.

Wall Street’s largest asset managers now custody and distribute exposure to Bitcoin, and financial advisors can allocate to it within their normal brokerage accounts, expanding the accessibility of crypto assets and helping drive record capital inflows.

As a result, this has been widely seen as the beginning of crypto’s integration into traditional financial markets, and there are growing expectations of broader institutional ownership, making the asset more mature, less volatile, and potentially acting as a portfolio hedge during periods of market stress.

That, however, may just be expectations for now, as academic evidence suggests the transformation in access hasn’t exactly resulted in a transformation in behavior.

While ETFs have accelerated institutional participation and improved market infrastructure, they haven’t fundamentally changed Bitcoin’s behavior, as the cryptocurrency still gets hit the hardest during financial stress.

Rather than evolving into a traditional safe-haven asset like gold, Bitcoin continues to exhibit characteristics of a risk-on asset, trading like a leveraged technology bet and amplifying portfolio losses when investors need protection most.

Bitcoin’s Evolution From Retail Speculation to Institutional Asset

Since its launch in 2009, Bitcoin has evolved significantly in terms of both ownership and adoption. During its early years, the cryptocurrency was almost entirely dominated by retail investors. Cryptographers, technology enthusiasts, and online communities mined and exchanged BTC directly with each other, without the involvement of banks or brokers.

These crypto-native participants were attracted to Bitcoin’s decentralized design, fixed supply, and potential as an alternative monetary system.

At that time, crypto trading mainly happened on unregulated platforms prone to failures. Also, owning Bitcoin meant holders had to run their own wallet software and protect their own private keys.

Institutional participation during this early period was extremely limited. Institutions stayed away from Bitcoin due to regulatory uncertainty, custody challenges, compliance concerns, and the lack of familiar investment vehicles. But things began to change gradually over the last several years as the ecosystem matured.

The change began between 2017 and 2023, with the emergence of futures markets, regulated custodians, improved market infrastructure, and regulatory guidance, which made Bitcoin investment possible for institutions such as hedge funds, venture capital firms, and academic endowments.

These were followed by public companies like Strategy (MSTR ), Block (SQ ), and Tesla (TSLA ), which added Bitcoin to their balance sheets, while wealth managers and family offices started allocating modest portions of their diversified portfolios to the asset.

But then the most dramatic change happened almost overnight with the arrival of spot Bitcoin ETFs. That removed many operational barriers to direct crypto ownership by allowing investors to access Bitcoin through the brokerage accounts they already use to buy stocks.

Packaging Bitcoin in a traditional, familiar product made the asset conveniently investable for capital that hadn’t been able to access it before. This includes family offices with fiduciary mandates, corporate treasuries, registered investment advisors managing clients’ retirement savings, sovereign wealth funds, and even state government pension systems.

With just one regulatory decision, the institutionalization of Bitcoin accelerated sharply. But while this institutionalization gained speed quickly, the journey itself was long. In fact, it took more than a decade to secure this approval, which changed the crypto space. 

Bitcoin’s Long Road to Spot Bitcoin ETFs

The road to spot Bitcoin ETFs spans more than a decade.

That’s right. The crypto industry had been trying to get a spot ETF approved for a long time. The first proposal came in 2013, when Cameron and Tyler Winklevoss, the twins best known for their early involvement with Facebook and as founders of the regulated crypto exchange Gemini, filed a proposal for a Bitcoin ETF. At the time, BTC was trading around $100.

Their Winklevoss Bitcoin Trust would have been the first exchange-traded product to track Bitcoin, allowing ordinary investors to gain exposure without having to manage a crypto wallet.

But that didn’t happen. The securities regulator sat on the application for years before formally rejecting it in early 2017, citing concerns that the underlying Bitcoin markets were unregulated, vulnerable to fraud and manipulation, and lacked sufficient surveillance mechanisms and adequate investor protections.

The Winklevoss twins made another attempt but were again rejected in 2018 on similar grounds.

Over the years, numerous other issuers, including Grayscale, VanEck, SolidX, Bitwise, WisdomTree, Fidelity, Valkyrie, and ARK Invest, filed and refiled their spot Bitcoin ETF applications, but the SEC didn’t approve any of them. The regulator continued to turn down everyone, citing the same core concerns: an unregulated, fragmented spot market for the underlying asset; the potential for wash trading and price manipulation on offshore exchanges; and doubts about whether exchanges could adequately surveil such activity.

In 2021, the regulator did make an exception. It approved Bitcoin futures ETFs on the basis that they track futures contracts traded on the Chicago Mercantile Exchange (CME), whose oversight reduced some of the SEC’s concerns.

But that wasn’t the same as a spot Bitcoin ETF, which holds actual BTC, unlike Bitcoin futures ETFs, whose buyers only hold futures contracts, and the SEC continued to treat the two very differently.

It wasn’t until early 2024 that spot Bitcoin ETFs became a reality in the US. That happened only after BlackRock entered the space, which also made the industry optimistic about the approval.

The world’s largest asset manager filed for a spot Bitcoin ETF in June 2023, when BTC was trading around $30,000. What fueled the optimism was BlackRock’s long, strong track record of securing the SEC’s green light for ETFs. It boasted a 575-1 approval rate at the time.

In addition to having successfully brought almost all ETFs to market and a reputation for close regulatory compliance, BlackRock’s proposal included a surveillance-sharing agreement with Nasdaq and Coinbase to address the SEC’s longstanding concerns about market manipulation.

BlackRock wasn’t the sole reason for the ETF approval, though. Its filing came at a time when the crypto industry itself was going through a broader regulatory turning point.

This included a federal court ruling in favor of Grayscale Investments in its 2022 challenge to the SEC’s rejection of its ETF conversion. Grayscale had applied to convert its Bitcoin trust into an ETF but was rejected by the SEC, so it sued the agency over the repeated denials.

The agency argued that the proposal didn’t meet anti-fraud and investor protection standards, while Grayscale countered that, since the regulator had already approved certain surveillance agreements to prevent fraud in futures-based ETFs, the same setup should also be satisfactory for Grayscale’s spot fund, since both funds rely on the BTC price.

The same year traditional finance giant BlackRock entered the crypto space, the court ruled in Grayscale’s favor, deeming the SEC’s rejection of its spot Bitcoin ETF application “arbitrary and capricious.” The SEC chose not to appeal the decision.

Together, these developments resulted in the SEC’s simultaneous approval of multiple spot Bitcoin ETFs on January 10, 2024.

More than a decade after the Winklevoss twins’ first filing, the spot Bitcoin ETF had finally arrived, opening a new chapter in Bitcoin’s integration with traditional finance.

What Are Spot Bitcoin ETFs and Why They Matter

An exchange-traded fund (ETF) is an investment vehicle that trades on stock exchanges.

The vehicle holds an underlying basket of assets, packaged into a single security that trades like an ordinary stock. Authorized participants create and redeem shares in large blocks, keeping the ETF’s market price closely tethered to the value of the asset it holds.

Instead of directly owning the underlying assets, investors purchase ETF shares that allow them to gain exposure through brokerage accounts that they are familiar with, with little operational complexity and without custody issues. This structure is a widely popular and primary way for investors to access gold, oil, and foreign currencies.

In the case of a Bitcoin Spot ETF, investors gain exposure to the crypto asset without needing to buy, store, or manage that asset themselves. It directly holds BTC, which is purchased and custodied on behalf of its clients; thus, the value of the ETF closely tracks the spot price of Bitcoin.

In contrast, a Bitcoin futures ETF merely references Bitcoin’s price and requires constant rolling, incurs contango-related costs, and faces tracking inefficiencies that can have price drift from the spot price over time.

This difference is why spot approval was such a big moment for the entire crypto industry. It allowed those who had to follow strict rules to finally invest in Bitcoin, thus broadening the investor base significantly. 

Wrapping Bitcoin in a structure that has existed for decades simplified taxation and portfolio reporting on top of custody and operational compliance for traditional finance investors, encouraging many institutional investors to participate in cryptocurrency markets.

As a result, not only those who were unable to own crypto, but even institutions that were previously reluctant to include Bitcoin in their portfolios, now had no excuse.

They now had an established, safe, and regulated way to access the crypto asset. With this straightforward path, Bitcoin’s main audience shifted from leveraged retail traders to institutions, expanding its potential pool of capital and giving it legitimacy it had never had.

For the crypto ecosystem, spot ETFs represented an important milestone, effectively embedding Bitcoin within the traditional financial system. 

Bitcoin, after all, became investable through the very same channels used for stocks, bonds, and conventional ETFs. This allowed the incorporation of Bitcoin exposure into diversified portfolios without requiring specialized crypto infrastructure.

More than all this, the ETF’s effect was immediate and unprecedented. US spot Bitcoin ETFs collectively captured tens of billions of dollars in net inflows during their first year, making the launch among the most successful ETF debuts in US history.

Source: Farside

Strong investor demand drove rapid growth in assets under management (AUM), with BlackRock’s iShares Bitcoin Trust (IBIT) becoming the industry’s largest fund. IBIT actually became the fastest ETF in history to reach $10 billion in assets, that too in just 49 days, compared to the previous record-holder, which took almost three years to hit.

It didn’t just stop there. By April of that first year, IBIT had surpassed $20 billion, and by the end of the year, the AUM had reached $50 billion. Overall, ETFs together pulled in over $35 billion in net inflows in the debut year while their total AUM climbed to $106.6 billion as the BTC price hit $100k.

The second year was a bit complicated for ETFs as they experienced both massive net inflows and outflows. In particular, Spot Bitcoin ETF assets had outsized outflows early and later in 2025. For a brief moment, the AUM hit $170 billion before the Bitcoin price even hit a fresh all-time high (ATH) at just above $126,000. 

In contrast to the first two years, 2026 has been a rougher year, dominated by outflows that are driven by risk-off sentiment.

This resulted in a drawdown in Bitcoin’s price, which, as of writing, is trading at around $62,000, down almost 51% from its peak. The downtrend has now dragged the ETFs’ cumulative net inflow to $51.37 billion and total net assets to $77.26 billion, according to data from SoSoValue. IBIT’s AUM has also fallen to $46.7 billion.

The troubling period is still ongoing, with Bitcoin Spot ETFs only recently having three consecutive days of net inflows after a prolonged run of outflows. This Monday, they had the largest daily inflow in over a month at just $265.69 million.

The largest net inflow on record was on Oct.6, 2025, when ETFs pulled in over $1.2 billion. So far this year, spot bitcoin ETFs haven’t had a single day of a billion-dollar inflow, while there were 3 such days in 2025 and 4 in 2024.

This round trip, where explosive first-year growth was followed by a drawdown that tracked equity-market stress, shows that while Bitcoin is becoming easier to own institutionally, it is definitely not safer to own defensively.

What the Research Actually Shows

A recent study titled “Institutionalization without integration: Bitcoin after the spot ETF“¹ by Hojun Kang and Sang-Gun Lee from Sogang University examined whether the spot Bitcoin ETF era changed Bitcoin’s relationship with traditional assets.

To analyze BTC’s connectedness with the S&P 500, gold, and the VIX between January 2020 and October 2025, the authors used a frequency-dependent time-varying parameter vector autoregression (TVP-VAR) model.

They didn’t just focus on price performance but looked into how financial shocks spread across markets over different investment horizons.

What they found was that short-term spillovers between Bitcoin and traditional assets declined “materially” in the period following the ETF approval. But very little has changed in their longer-term relationships.

According to the study, this combination is consistent with an institutionalization process that improved market microstructure more quickly than it altered the cryptocurrency’s deeper integration with traditional asset markets.

So, despite greater institutional ownership, Bitcoin hasn’t been more meaningfully integrated into the broader financial system.

“The spot Bitcoin ETF era looks quieter at short horizons, yet Bitcoin still does not resemble a deeply integrated or defensive traditional asset,” stated the study.

Interestingly, placebo tests suggest the evolution actually began in 2023, as a decline in short-run spillovers was already visible back then. So, instead of viewing the January 2024 ETF approval as a singular event that fundamentally transformed Bitcoin’s market behavior, it should be seen as an important milestone within an ongoing institutionalization process.

The approval didn’t create an abrupt structural break; rather, it “marked a highly visible stage within a broader transition in market participation and trading conditions,” which also “explains why the long-run result is muted,” the authors noted.

Notably, longer-horizon integration doesn’t fully manifest within a couple of years, as it depends on stronger balance-sheet links, slower-moving portfolio mandates, and persistent common exposures.

More importantly, the study found that Bitcoin continues to fail conventional safe-haven tests.

As a hedge, an asset needs to be either uncorrelated or negatively correlated with another asset on average, while a safe-haven asset is uncorrelated or negatively correlated specifically during periods of market stress. As for a diversifier, it exhibits positive but imperfect correlation.

Bitcoin isn’t any of these, and its failure to reduce portfolio risk can be seen during periods of elevated market volatility, when its connectedness with equities increases, just as it did in the pre-ETF era during the 2020 COVID crash, instead of decreasing.

So, just when investors are seeking protection from market stress, Bitcoin is unable to preserve value. This behavior, the authors noted, remained unchanged even after the launch of spot Bitcoin ETFs. The study concluded:

“Bitcoin has, in short, been institutionalized without being integrated as a defensive store of value—a distinction that should inform how investors and policymakers interpret the maturation of the cryptocurrency market.” 

As the paper points out, greater adoption and larger flows don’t automatically make Bitcoin a central source of price discovery for traditional assets, or turn the cryptocurrency protective when risk sentiment deteriorates broadly.

This makes it clear that institutionalization through spot Bitcoin ETFs improved access and market structure and may have even reduced short-term market noise, but it did not change Bitcoin’s fundamental behavior or transform it into digital gold, a defensive hedge, or a safe-haven asset during equity-market stress.

BlackRock (BLK )

The world’s largest asset manager, BlackRock, oversees $13.9 trillion across equity, fixed income, alternatives, ETFs, and multi-asset investment strategies.

It helped institutionalize Bitcoin ownership through IBIT, but as the latest study suggests, ETF access alone hasn’t changed Bitcoin’s underlying stress behavior. For BLK investors, however, ETF demand can continue to expand AUM and fee revenue even if Bitcoin itself remains a high-beta risk asset rather than a portfolio hedge.

Beyond launching IBIT, BlackRock has introduced the iShares Ethereum Trust and taken tokenization initiatives.

With a market cap of $164.4 billion, BLK shares are currently trading at $1,010, down 5.69% YTD. It has an EPS (TTM) of 38.42 and a P/E (TTM) of 26.27. BlackRock pays a dividend yield of 2.27%.

As for company financials, BlackRock reported $130 billion of quarterly total net inflows for Q1 2026, “led by a record first quarter for iShares® ETFs alongside active and private markets net inflows.”

The company’s revenue increased 27% YoY. Meanwhile, adjusted operating income increased 31% YoY and adjusted diluted EPS increased 11% YoY.

“BlackRock delivered one of the strongest starts to a year in our history,” said Chairman and CEO Larry Fink. The results “reflect a business with accelerating momentum, deep client engagement, and a platform built to compound across market environments.”

The company also reported repurchasing $450 million worth of shares in Q2 and increased its quarterly cash dividend by 10% to $5.73 per share.

Conclusion

Spot Bitcoin ETFs have played a major role in Bitcoin’s transformation from a retail-fueled experiment to a legitimate asset class that has found its place in sovereign wealth funds and pension portfolios.

The investment vehicle improved accessibility, strengthened regulatory oversight, and lowered operational and compliance barriers, allowing massive sidelined capital to be deployed into Bitcoin through familiar financial infrastructure.

This institutionalization, however, has failed to change Bitcoin’s relationship with market stress.

For BlackRock, this has provided a highly profitable product, but for investors treating Bitcoin exposure as a substitute for gold or bonds in a diversified portfolio, easier access to a risk asset is not the same as access to a safer one.

References

1. Kang, H. & Lee, S.-G. Institutionalization without integration: Bitcoin after the spot ETF. International Review of Economics & Finance, 105531 (2026). https://doi.org/10.1016/j.iref.2026.105531