Is the Introduction of Futures Responsible for the Crash of Bitcoin

Liu, Ruozhou; Wan, Shanfeng; Zhang, Zili; Zhao, Xuejun

doi:10.2139/ssrn.3333009

Is the Introduction of Futures Responsible for the Crash of Bitcoin

Finance Research Letters, Forthcoming

12 Pages Posted: 1 Mar 2019 Last revised: 21 Jan 2020

See all articles by Ruozhou Liu

Ruozhou Liu

Peking University - Guanghua School of Management; Harvest Fund Management Co., Ltd.

Shanfeng Wan

University of International Business and Economics (UIBE) - School of International Trade and Economics

Xuejun Zhao

Harvest Fund Management Co., Ltd.

Date Written: June 14, 2019

Abstract

The price of Bitcoin reached its peak a mere few days after the introduction of Bitcoin futures and suffered an 80% loss in the following year. In this paper, we find a significant and negative relationship between the introduction of Bitcoin futures and Bitcoin returns, and an insignificant or positive relationship for other 7 major non-Bitcoin cryptocurrencies. Within the first 45 days after the futures launch, Bitcoin suffered a -26.50% loss, while other cryptocurrencies could still provide positive returns. We presume that the launch of Bitcoin futures was to an extent responsible for the crash of Bitcoin.

Keywords: Bitcoin; Crypto-Currencies; Bitcoin Futures; Market Crash

JEL Classification: G14; G15

Suggested Citation: Suggested Citation

Liu, Ruozhou and Wan, Shanfeng and Zhang, Zili and Zhao, Xuejun, Is the Introduction of Futures Responsible for the Crash of Bitcoin (June 14, 2019). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3333009 or http://dx.doi.org/10.2139/ssrn.3333009