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
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Englisch
- Bibliographic citation
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Series: LawFin Working Paper ; No. 41
- Classification
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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
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bitcoin
blockchain
cryptocurrencies
derivatives
fintech
regulation
- Event
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Geistige Schöpfung
- (who)
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Augustin, Patrick
Rubtsov, Alexey
Shin, Donghwa
- Event
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Veröffentlichung
- (who)
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Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin)
- (where)
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Frankfurt a. M.
- (when)
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2022
- Handle
- Last update
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10.03.2025, 11:42 AM CET
Data provider
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