Bitcoin ETFs and structural decoupling in the cryptocurrency market: evidence from altcoin correlation dynamics

The approval of U.S.-based spot Bitcoin Exchange-Traded Funds (ETFs) in January 2024 marked a key milestone in the institutionalization of digital assets. This study examines how ETF introduction reshaped inter-asset dynamics in the cryptocurrency market. Using daily returns from January 2021 to September 2025 for Bitcoin and 18 major altcoins, we apply a Long Short-Term Memory (LSTM) neural network to capture evolving return correlations. Our analysis reveals a pronounced post-ETF decline in correlations across both short-term (6-month) and long-term (12-month) rolling windows. We interpret this structural decoupling as the effect of ‘independent inflows’, whereby institutional capital enters Bitcoin without proportionate investment in altcoins. The findings suggest that Bitcoin is evolving into a distinct, standalone asset class with weaker integration in the broader cryptocurrency market. Policy and investment implications include reconsidering portfolio diversification strategies, reassessing systemic risk, and designing digital asset financial instruments to account for market segmentation and institutional flows.

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Publication Details

Journal
Cogent Economics & Finance
Published
2026-02-09
DOI
https://doi.org/10.1080/23322039.2026.2625541
Primary Topic
Blockchain Technology Applications and Security
Type
article
Field-Weighted Citation Impact
0.00
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article

Bitcoin ETFs and structural decoupling in the cryptocurrency market: evidence from altcoin correlation dynamics

Hancheng Huang, Lin Xie, Yuqin Zhou, Yuxuan Li et al.
Cogent Economics & Finance
Blockchain Technology Applications and Security
article

Bitcoin ETFs and structural decoupling in the cryptocurrency market: evidence from altcoin correlation dynamics

Hancheng Huang, Lin Xie, Yuqin Zhou, Yuxuan Li, Jun Huang
article en

Abstract

The approval of U.S.-based spot Bitcoin Exchange-Traded Funds (ETFs) in January 2024 marked a key milestone in the institutionalization of digital assets. This study examines how ETF introduction reshaped inter-asset dynamics in the cryptocurrency market. Using daily returns from January 2021 to September 2025 for Bitcoin and 18 major altcoins, we apply a Long Short-Term Memory (LSTM) neural network to capture evolving return correlations. Our analysis reveals a pronounced post-ETF decline in correlations across both short-term (6-month) and long-term (12-month) rolling windows. We interpret this structural decoupling as the effect of ‘independent inflows’, whereby institutional capital enters Bitcoin without proportionate investment in altcoins. The findings suggest that Bitcoin is evolving into a distinct, standalone asset class with weaker integration in the broader cryptocurrency market. Policy and investment implications include reconsidering portfolio diversification strategies, reassessing systemic risk, and designing digital asset financial instruments to account for market segmentation and institutional flows.

Cogent Economics & FinanceVol. 14(1)
Hong Kong Baptist University (HK), Southwest University (CN), Macao Polytechnic University (MO), City University of Macau (MO), London School of Economics and Political Science (GB)
Openalex Percentile: Top 73%
Blockchain Technology Applications and Security
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