Bitcoin Futures - What Use are They?
12 Pages Posted: 27 Jun 2018
Date Written: June 16, 2018
Early analysis of Bitcoin concluded that it did not meet the economic conditions to be classified as a currency. Since this analysis interest in bitcoin has increased substantially. We investigate whether the introduction of futures trading in bitcoin is able to resolve the issues that stopped bitcoin from being considered a currency. Our analysis shows that spot volatility has increased following the announcement of the futures contracts, the futures contracts are not an effective hedging instrument and that price discovery is driven by uninformed investors in the spot market. The conclusion that bitcoin is a speculative asset rather than a currency is not altered by the introduction of futures trading.
Keywords: Cryptocurrencies, Futures markets, Volatility, Speculative Assets, Currencies, information shares
JEL Classification: G13
Suggested Citation: Suggested Citation