Unveiling Bitcoin’s Financialization via Multivariate Wavelet Analysis

Since its inception, Bitcoin has evolved from a decentralized peer-to-peer electronic cash system into a prominent digital asset, sparking an intense debate regarding its fundamental economic nature. This study investigates the financialization of Bitcoin—its transition toward increasing dependence on traditional macroeconomic forces—over the period 2019–2026. Employing a comprehensive suite of time–frequency methodologies, including Bivariate, Partial, and Multiple Wavelet Coherence (WTC, PWC, MWC), alongside a dynamic Sharpe ratio analysis, we examine the evolving interdependencies between Bitcoin and key systemic-risk indicators (VIX, OFR FSI), traditional safe-haven assets (Gold, U.S. T-Bills), and global equity benchmarks (Nasdaq, MSCI-IMI). The empirical evidence is inconsistent with the prevailing narrative of Bitcoin as a reliable safe-haven asset: it does not provide consistent downside protection during periods of high systemic stress, and its risk-adjusted performance declines synchronously across all holding horizons during macroeconomic contractions. Instead, once cross-market confounding factors are isolated, Bitcoin’s price dynamics co-move intensely with global equity cycles and systemic risk, particularly during crises. These results indicate a regime- and scale-dependent financialization: Bitcoin behaves as a highly integrated “risk-on” asset whose diversification properties are unstable precisely when downside protection is most needed. The study underscores the need for active portfolio management and coordinated regulatory frameworks to address Bitcoin’s deepening interconnectedness with traditional financial markets.