Uncovering the impact of regulated Bitcoin futures on volatility and volume

Abstract

In December 2017, two leading derivative exchanges, CBOE and CME, introduced the first
regulated Bitcoin futures. Our aim is estimating their impact on Bitcoin volatility and trading
volume. Employing a new causal approach, C-ARIMA, we find that the CME future triggered an
increase in both outcomes. There is also evidence of a positive volume-volatility relationship and
that the effect on volatility was partially due to the higher trading volumes induced by the launch of
the contract. After controlling for the effect on volumes, we find that the CME instrument caused
Bitcoin volatility to increase by more than double.

Keywords: Bitcoin, Causal inference, Counterfactual analysis, Futures, Volatility, Volume

JEL Classification: C22, G15, G17