Efficient Price Discovery in the Bitcoin Markets

20 Pages Posted: 8 Dec 2020

See all articles by Alexander Chang

Alexander Chang

Wilshire Phoenix Funds LLC

William Herrmann

Wilshire Phoenix Funds LLC

Wlliam Cai

Wilshire Phoenix Funds LLC

Date Written: October 14, 2020

Abstract

The findings of Wilshire Phoenix indicate that CME Bitcoin Futures contribute more to price discovery than its related spot markets. Our analysis was performed using similar methodology previously employed by the SEC’s Division of Economic and Risk Analysis to evaluate price formation. CME Bitcoin Futures have grown to become significant, this is not only demonstrated through trading volume and open interest, but also by influence on spot price formation. A leading futures market suggests the existence of a robust base of traders who may trade on such market for many reasons such as trust in the exchange venue and lower latency. Studies on price formation between the spot and futures markets in other asset classes often find that the futures markets lead.

Suggested Citation

Chang, Alexander and Herrmann, William and Cai, Wlliam, Efficient Price Discovery in the Bitcoin Markets (October 14, 2020). Available at SSRN: https://ssrn.com/abstract=3733924 or http://dx.doi.org/10.2139/ssrn.3733924

Alexander Chang (Contact Author)

Wilshire Phoenix Funds LLC ( email )

2 Park Avenue
20th Floor
New York, NY 10016
United States

William Herrmann

Wilshire Phoenix Funds LLC ( email )

2 Park Avenue
20th Floor
New York, NY 10016
United States

Wlliam Cai

Wilshire Phoenix Funds LLC ( email )

2 Park Avenue
20th Floor
New York, NY 10016
United States

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