Price discovery in the Bitcoin futures and cash markets

Authored by: Tatja Karkkainen

The Routledge Handbook of FinTech

Print publication date:  June  2021
Online publication date:  June  2021

Print ISBN: 9780367263591
eBook ISBN: 9780429292903
Adobe ISBN:


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Following the popularity of Bitcoin trading in recent years, Bitcoin futures were introduced in December 2017 as an effort to provide institutional and retail investors with additional trading tools for Bitcoin. This study analyses the Bitcoin futures mid-quote data from CBOE, and Bitcoin market index applying VAR and VECM process methodologies, Hasbrouck’s information share and the Gonzalo-Granger component share measurement to examine price discovery in Bitcoin markets. Furthermore, the chapter seeks to assess the Bitcoin market microstructure. The results drawn on the intra-day prices show that the futures are leading the price discovery at different frequencies even with comparably low futures trading volumes. This supports the extant literature of futures-spot market price discovery and the role of informed traders in the futures market.

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