What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying perspective?

Hu, Yang; Hou, Yang; Oxley, Les

doi:10.1016/j.irfa.2020.101569

Cited by 31 publications

(10 citation statements)

References 61 publications

(117 reference statements)

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“…Evidence from the quantile impulse responses analysis show the futures market seems to be more dominant than spot market under various market conditions. These findings are consistent with results reported by Akyildirim et al ( 2020 ), Hu et al ( 2020 ), Fassas et al ( 2020 ), Aleti and Mizrach ( 2020 ), Alexander and Heck (2020), Alexander et al ( 2019 ), Karkkainen ( 2018 ), and Kapar and Olma ( 2019 ).…”

Section: Data and Empirical Resultssupporting

confidence: 92%

“…On the other hand, Fassas et al ( 2020 ) examine the price discovery of Bitcoin spot and futures markets with evidence favouring a dominant role for the futures market in the price discovery process. Hu et al, ( 2020 ) find similar results using time-varying Granger predictability tests. Using BitMEX perpetual swap prices instead of CME and CBOE market data as future prices.…”

Section: Literature Reviewmentioning

confidence: 66%

“…They also stress that spot markets figured prominently early on when futures contracts were first launched; however, the situation was reversed with the entrance of sophisticated institutional investors. Other studies in the literature such as Karkkainen ( 2018 ), Kapar and Olmo ( 2019 ), Aleti and Mizrach ( 2020 ), and Hu et al ( 2020 ) also conclude that the futures market figures prominently in the price discovery process.…”

Section: Literature Reviewmentioning

confidence: 85%

“…Investor perception and behavior may differ depending on market conditions. This phenomenon is thoroughly examined in the finance literature (see Hanna et al, 2020; Hu et al, 2020 ; Chau et al, 2012; Zou & Sun, 2012). However, the evidence presented for investor sentiment and the spot/futures market interactions is quite limited.…”

Section: Discussionmentioning

confidence: 98%

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The connectedness and risk spillovers between bitcoin spot and futures markets: evidence from intraday data

et al. 2022

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This paper examines the dynamic relation between Bitcoin spot and futures markets during the Covid-19 pandemic. Using hourly data from 2020 combined with quantile impulse response analysis and predictability in the distribution test, we attempt to ascertain whether spot or futures markets lead in the price discovery process under a variety of market conditions. Granger predictability based on the left tail, the right tail, and the center of the distribution show bidirectional predictability between spot and futures markets suggesting significant feedback effects following normal and extreme gains/losses where neither market dominates in price discovery. Using a CAViaR model and the associated impulse response functions with estimates for dynamic tail dependence, we document spillovers between quantiles of spot and futures returns. Estimates of impulse response functions at various risk levels show the futures market has an edge in influencing the spot market and figures more prominently in the price discovery process.

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Section: Data and Empirical Resultssupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 66%

Section: Literature Reviewmentioning

confidence: 85%

Section: Discussionmentioning

confidence: 98%

See 2 more Smart Citations

The connectedness and risk spillovers between bitcoin spot and futures markets: evidence from intraday data

et al. 2022

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“…Lastly, this study also relates to three other strands of literature: a growing body of literature uses time-varying Granger causality tests (e.g., Diniz et al 2022;Hu et al 2020); financial studies focus on the role of individualism (e.g., Salcedo and Gupta 2021;Todea and Buglea 2017); Bitcoin research exploits Google Trends data (e.g., Urquhart 2018;Zhang et al 2021).…”

Section: Introductionmentioning

confidence: 99%

Timing Matters: Bitcoin Returns, Public Attention to COVID-19, and Individualism

Wang-Lu¹

2022

Preprint

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The pandemic evolution and people's concern over it have an impact on the Bitcoin market, while the extent of individualism differentiates how individuals respond to preventive measures and how investors behave on the financial market during the pandemic. This paper examines if public attention to COVID-19 in individualistic vs. collectivistic countries Granger causes Bitcoin returns between February 11, 2020 and May 09, 2022. In particular, from a time-varying perspective, it accounts for variations in the timing of COVID-19 issues across countries and circumvents the potential estimation bias that a Granger causality test could suffer, due largely to Google's sampling variation for different time frames. By comparing eight typically individualistic and collectivistic countries, the results show that collectivistic countries present a stronger pattern of causal relationships with Bitcoin returns than individualistic countries.

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The Economics of Liquid Staking Derivatives: Basis Determinants and Price Discovery

Scharnowski,

Jahanshahloo

2024

Journal of Futures Markets

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This paper provides a first economic analysis of liquid staking tokens, which are derivatives representing a share of staked tokens in Proof‐of‐Stake blockchains. We document substantial time‐variation in the “liquid staking basis” as given by the price difference between a derivative staking token and its underlying cryptocurrency. We find evidence that staking rewards, concentration risks, limits to arbitrage, and behavioral factors influence this basis. The liquid staking basis is wider when the yields offered by the liquid staking protocol are low relative to the alternative of staking directly, when cryptocurrency returns are more volatile, and when secondary market liquidity is low. In contrast, it is smaller when investors pay more attention to liquid staking and when investor sentiment is positive. Furthermore, liquid staking tokens contribute a significant and overall growing amount to price discovery in the underlying cryptocurrencies.

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What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying perspective?

Cited by 31 publications

References 61 publications

The connectedness and risk spillovers between bitcoin spot and futures markets: evidence from intraday data

The connectedness and risk spillovers between bitcoin spot and futures markets: evidence from intraday data

Timing Matters: Bitcoin Returns, Public Attention to COVID-19, and Individualism

The Economics of Liquid Staking Derivatives: Basis Determinants and Price Discovery

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