Journal
JOURNAL OF EMPIRICAL FINANCE
Volume 62, Issue -, Pages 107-120Publisher
ELSEVIER
DOI: 10.1016/j.jempfin.2021.03.001
Keywords
Bitcoin futures; Trading activity; Price discovery; COT reports; Modified information share
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This study reveals that hedgers' trading activities enhance the efficiency of Bitcoin futures markets, while retailers' trading causes instability in the CME market. Speculators have different impacts on price discovery in different markets, with CME's Bitcoin futures exhibiting superior performance compared to CBOE.
This study examines the impact of trading activities on price discovery in the Bitcoin futures markets. We find that trades of hedgers are positively correlated with the modified information shares in both CME and CBOE futures markets, suggesting that their trading promotes futures market efficiency. Retailers' trading activity relates negatively to the price discovery of the CME Bitcoin futures and thus destabilizes the market. Speculators exert positive (negative) impact on the price discovery in the CME (CBOE) Bitcoin futures. Our finding that CME's Bitcoin futures exhibit superior price discovery than CBOE's provides plausible justification for CBOE's decision in March 2019 to suspend further listings of Bitcoin futures contracts.
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