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Price discovery between Bitcoin spot markets and exchange traded products

Author

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  • Gemayel, Roland
  • Franus, Tatiana
  • Bowden, James

Abstract

We examine price discovery dynamics between Bitcoin exchange-traded products (ETPs) and spot markets on centralised cryptocurrency exchanges. We apply four popular price discovery measures to ETP and spot transaction data between August 2021 and July 2022. Our results show that price discovery is dominated by the spot market across all measures and sampling frequencies. This implies that ETP markets play a smaller role in the incorporation of new information about Bitcoin prices, and that informed investors largely prefer to trade on spot markets that offer significantly deeper liquidity and operate round the clock.

Suggested Citation

  • Gemayel, Roland & Franus, Tatiana & Bowden, James, 2023. "Price discovery between Bitcoin spot markets and exchange traded products," Economics Letters, Elsevier, vol. 228(C).
    • Handle: RePEc:eee:ecolet:v:228:y:2023:i:c:s0165176523001775
    DOI: 10.1016/j.econlet.2023.111152
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    More about this item

    Keywords

    Cryptocurrency; Bitcoin; Price discovery; Market efficiency; Exchange-traded products;
    All these keywords.

    JEL classification:

    • C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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