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How Futures Trading Changed Bitcoin Prices

Author

Listed:
  • Galina Hale
  • Arvind Krishnamurthy

    (Graduate School of Business
    University of Pennsylvania
    Massachusetts Institute of Technology
    University of Chicago Press)

  • Marianna Kudlyak

    (Federal Reserve Bank of San Francisco
    Federal Reserve Bank of Richmond)

  • Patrick Shultz

Abstract

From Bitcoin?s inception in 2009 through mid-2017, its price remained under $4,000. In the second half of 2017, it climbed dramatically to nearly $20,000, but descended rapidly starting in mid-December. The peak price coincided with the introduction of bitcoin futures trading on the Chicago Mercantile Exchange. The rapid run-up and subsequent fall in the price after the introduction of futures does not appear to be a coincidence. Rather, it is consistent with trading behavior that typically accompanies the introduction of futures markets for an asset.

Suggested Citation

  • Galina Hale & Arvind Krishnamurthy & Marianna Kudlyak & Patrick Shultz, 2018. "How Futures Trading Changed Bitcoin Prices," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
  • Handle: RePEc:fip:fedfel:00163
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    Cited by:

    1. Zura Kakushadze & Willie Yu, 2019. "Altcoin-Bitcoin Arbitrage," Papers 1903.06033, arXiv.org, revised Apr 2019.
    2. repec:rmk:rmkbae:v:6:y:2019:i:1:p:87-110 is not listed on IDEAS

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