Market Impact of the Bitcoin ETF Introduction on Bitcoin Futures

Abstract

We investigate the introduction effect of ProShares bitcoin strategy ETF (BITO) on investor structure and market quality in Chicago Mercantile Exchange bitcoin futures. We find that the BITO introduction significantly changes the investor structure in bitcoin futures, with ETF asset managers being the major long-side participants against the short-side hedge funds. Further, market participants become more concentrated and the market liquidity improves in the bitcoin futures after the BITO introduction. The change in investor structure hurts futures’ price efficiency on the first three days of BITO introduction, then back to the normal level. The BITO introduction does not appear to affect long-run market efficiency and volatility of bitcoin futures.

Keywords: Bitcoin futures, ProShares bitcoin strategy ETF (BITO), Efficiency, Liquidity.