Arbeitspapier

The impact of derivatives on spot markets: Evidence from the introduction of bitcoin futures contracts

Cryptocurrencies provide a unique opportunity to identify how derivatives impact spot markets. They are fully fungible, trade across multiple spot exchanges at different prices, and futures contracts were selectively introduced on bitcoin (BTC) exchange rates against the USD in December 2017. Following the futures introduction, we find a significantly greater increase in cross-exchange price synchronicity for BTC-USD relative to other exchange rate pairs, as demonstrated by an increase in price correlations and a reduction in arbitrage opportunities and volatility. We also find support for an increase in price efficiency, market quality, and liquidity. The evidence suggests that futures contracts allowed investors to circumvent trading frictions associated with short sale constraints, arbitrage risk associated with block confirmation time, and market segmentation. Overall, our analysis supports the view that the introduction of BTC-USD futures was beneficial to the bitcoin spot market by making the underlying prices more informative.

Language
Englisch

Bibliographic citation
Series: LawFin Working Paper ; No. 41

Classification
Wirtschaft
Asset Pricing; Trading Volume; Bond Interest Rates
Contingent Pricing; Futures Pricing; option pricing
Information and Market Efficiency; Event Studies; Insider Trading
Technological Change: Choices and Consequences; Diffusion Processes
Related Disciplines
Subject
bitcoin
blockchain
cryptocurrencies
derivatives
fintech
regulation

Event
Geistige Schöpfung
(who)
Augustin, Patrick
Rubtsov, Alexey
Shin, Donghwa
Event
Veröffentlichung
(who)
Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
(where)
Frankfurt a. M.
(when)
2022

Handle
Last update
10.03.2025, 11:42 AM CET

Data provider

This object is provided by:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Augustin, Patrick
  • Rubtsov, Alexey
  • Shin, Donghwa
  • Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)

Time of origin

  • 2022

Other Objects (12)