<p>Bitcoin, the leading cryptocurrency by value, has witnessed remarkable growth, becoming a popular investment that significantly impacts financial markets. However, its relationship with traditional assets, which is constantly evolving, remains poorly understood. Therefore, this study investigates the time-varying return correlations and spillover effects between Bitcoin and traditional asset classes, highlighting the influences of the COVID-19 pandemic and US monetary policy on these relationships. We find that their connection has increased substantially since the COVID-19 pandemic in March 2020. Moreover, we demonstrate that US monetary policy plays a crucial role in driving this dynamic relationship. Bitcoin moves in tandem with traditional assets and exhibits negative responses during contractionary monetary policy periods after COVID-19. Our findings are beneficial for investors making asset allocation decisions and policymakers formulating regulations. The strengthening link between Bitcoin and traditional assets diminishes its diversification benefits and poses potential threats to financial stability. </p>