BitMEX Bitcoin Derivatives: Price Discovery, Informational Efficiency and Hedging Effectiveness
Journal of Futures Markets, 40(1):23-43, 2020
35 Pages Posted: 9 Apr 2019 Last revised: 8 Dec 2019
Date Written: March 15, 2019
BitMEX is the largest unregulated bitcoin derivatives exchange, listing contracts suitable for leverage trading and hedging. Using minute-by-minute data, we examine its price discovery and hedging effectiveness. We find that BitMEX derivatives lead prices on major bitcoin spot exchanges. Bid-ask spreads, inter-exchange spreads and relative trading volumes are important determinants of price discovery. Further analysis shows that BitMEX derivatives have positive net spillover effects, are informationally more efficient than bitcoin spot prices, and serve as effective hedges against spot price volatility. Our evidence suggests that regulators prioritise investigation of the legitimacy of BitMEX and its contracts.
Keywords: bitcoin, BitMEX, market efficiency, price discovery, spillover
JEL Classification: G14
Suggested Citation: Suggested Citation