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Bitcoin spot and futures market microstructure

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  • Saketh Aleti
  • Bruce Mizrach

Abstract

We study Bitcoin (BTC) trading at the Chicago Mercantile Exchange (CME) and four settlement spot exchanges that transact $146 million per day in the BTC/USD pair. Spot market median trade sizes are under $1,300 but exceed $18,000 on the CME. Bid‐ask spreads average 0.0298%. Trade sizes of over $1 million move markets by less than 1%. 2.5% of trades and 15.5% of cancellations on Coinbase take place within 50 ms. Bid‐ask spreads exceed 0.8% for only 226 s. Most executions trade‐through better quotes, with estimated losses of $36 million. The CME leads price discovery. BTC leads Ethereum price adjustment.

Suggested Citation

  • Saketh Aleti & Bruce Mizrach, 2021. "Bitcoin spot and futures market microstructure," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(2), pages 194-225, February.
    • Handle: RePEc:wly:jfutmk:v:41:y:2021:i:2:p:194-225
    DOI: 10.1002/fut.22163
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    References listed on IDEAS

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    Cited by:

    1. Pati, Pratap Chandra, 2022. "Informativeness of CME Micro Bitcoin Futures in Pricing of Bitcoin: Intraday Evidence," Finance Research Letters, Elsevier, vol. 49(C).
    2. Augustin, Patrick & Rubtsov, Alexey & Shin, Donghwa, 2022. "The impact of derivatives on spot markets: Evidence from the introduction of bitcoin futures contracts," LawFin Working Paper Series 41, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).
    3. Shimeng Shi, 2022. "Bitcoin futures risk premia," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(12), pages 2190-2217, December.
    4. Almeida, José & Gonçalves, Tiago Cruz, 2023. "A systematic literature review of investor behavior in the cryptocurrency markets," Journal of Behavioral and Experimental Finance, Elsevier, vol. 37(C).
    5. Riccardo De Blasis & Alexander Webb, 2022. "Arbitrage, contract design, and market structure in Bitcoin futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(3), pages 492-524, March.
    6. Bruce Mizrach, 2022. "Stablecoins: Survivorship, Transactions Costs and Exchange Microstructure," Papers 2201.01392, arXiv.org, revised Feb 2023.

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