IDEAS home Printed from https://ideas.repec.org/a/wly/jfutmk/v45y2025i4p269-288.html
   My bibliography  Save this article

Price Discovery in Bitcoin Spot or Futures? The Jury Is Out

Author

Listed:
  • Alex Frino
  • Robert Gaudiosi
  • Robert I. Webb
  • Z. Ivy Zhou

Abstract

This study clarifies discrepancies in previous research on the contribution of regulated Bitcoin futures to price discovery, where conclusions have varied between futures leading over spot markets or vice versa. We identify potential reasons behind these conflicting findings, including the choice of price discovery measures, sampling frequencies, modeling windows, futures contracts, and spot exchanges. Using 1‐s sampling frequencies to accurately capture price discovery in the fast‐paced markets and accounting for substantial noise differences between spot and futures markets, we find that the futures market generally leads spot markets, though this price leadership exhibits daily fluctuations. Moreover, we observe a pronounced increase in the futures market's contribution to price discovery around macroeconomic surprises and Tether stablecoin minting tweets.

Suggested Citation

  • Alex Frino & Robert Gaudiosi & Robert I. Webb & Z. Ivy Zhou, 2025. "Price Discovery in Bitcoin Spot or Futures? The Jury Is Out," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 45(4), pages 269-288, April.
    • Handle: RePEc:wly:jfutmk:v:45:y:2025:i:4:p:269-288
    DOI: 10.1002/fut.22560
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/fut.22560
    Download Restriction: no
    File URL: https://libkey.io/10.1002/fut.22560?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Erik Theissen, 2012. "Price discovery in spot and futures markets: a reconsideration," The European Journal of Finance, Taylor & Francis Journals, vol. 18(10), pages 969-987, November.
    2. Mykola Pinchuk, 2023. "Bitcoin Does Not Hedge Inflation," Papers 2301.10117, arXiv.org.
    3. Philipp Adämmer & Martin T. Bohl & Christian Gross, 2016. "Price Discovery in Thinly Traded Futures Markets: How Thin is Too Thin?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 36(9), pages 851-869, September.
    4. Dirk G. Baur & Thomas Dimpfl, 2019. "Price discovery in bitcoin spot or futures?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(7), pages 803-817, July.
    5. Chen, Yu-Lun & Gau, Yin-Feng, 2010. "News announcements and price discovery in foreign exchange spot and futures markets," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1628-1636, July.
    6. Makarov, Igor & Schoar, Antoinette, 2020. "Trading and arbitrage in cryptocurrency markets," Journal of Financial Economics, Elsevier, vol. 135(2), pages 293-319.
    7. Jonathan Brogaard & Terrence Hendershott & Ryan Riordan, 2019. "Price Discovery without Trading: Evidence from Limit Orders," Journal of Finance, American Finance Association, vol. 74(4), pages 1621-1658, August.
    8. Renault, Thomas, 2017. "Intraday online investor sentiment and return patterns in the U.S. stock market," Journal of Banking & Finance, Elsevier, vol. 84(C), pages 25-40.
    9. Ante, Lennart & Fiedler, Ingo, 2021. "Market reaction to large transfers on the Bitcoin blockchain - Do size and motive matter?," Finance Research Letters, Elsevier, vol. 39(C).
    10. Joel Hasbrouck, 2021. "Rejoinder on: Price Discovery in High Resolution," Journal of Financial Econometrics, Oxford University Press, vol. 19(3), pages 465-471.
    11. Thomas Renault, 2017. "Intraday online investor sentiment and return patterns in the U.S. stock market," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03205113, HAL.
    12. Juan Cabrera & Tao Wang & Jian Yang, 2009. "Do futures lead price discovery in electronic foreign exchange markets?," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 29(2), pages 137-156, February.
    13. Blasco, N. & Corredor, P. & Satrústegui, N., 2023. "Is there an expiration effect in the bitcoin market?," International Review of Economics & Finance, Elsevier, vol. 85(C), pages 647-663.
    14. Easley, David & O'Hara, Maureen & Basu, Soumya, 2019. "From mining to markets: The evolution of bitcoin transaction fees," Journal of Financial Economics, Elsevier, vol. 134(1), pages 91-109.
    15. Yiuman Tse & Paramita Bandyopadhyay & Yang‐Pin Shen, 2006. "Intraday Price Discovery in the DJIA Index Markets," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9‐10), pages 1572-1585, November.
    16. Hung, Jui-Cheng & Liu, Hung-Chun & Yang, J. Jimmy, 2021. "Trading activity and price discovery in Bitcoin futures markets," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 107-120.
    17. Dimpfl, Thomas & Peter, Franziska J., 2021. "Nothing but noise? Price discovery across cryptocurrency exchanges," Journal of Financial Markets, Elsevier, vol. 54(C).
    18. Putniņš, Tālis J., 2013. "What do price discovery metrics really measure?," Journal of Empirical Finance, Elsevier, vol. 23(C), pages 68-83.
    19. Hasbrouck, Joel, 1995. "One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, vol. 50(4), pages 1175-1199, September.
    20. Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
    21. Lehmann, Bruce N., 2002. "Some desiderata for the measurement of price discovery across markets," Journal of Financial Markets, Elsevier, vol. 5(3), pages 259-276, July.
    22. Makarov, Igor & Schoar, Antoinette, 2020. "Trading and arbitrage in cryptocurrency markets," LSE Research Online Documents on Economics 100409, London School of Economics and Political Science, LSE Library.
    23. Yiuman Tse & Paramita Bandyopadhyay & Yang-Pin Shen, 2006. "Intraday Price Discovery in the DJIA Index Markets," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9-10), pages 1572-1585.
    24. Frijns, Bart & Gilbert, Aaron & Tourani-Rad, Alireza, 2015. "The determinants of price discovery: Evidence from US-Canadian cross-listed shares," Journal of Banking & Finance, Elsevier, vol. 59(C), pages 457-468.
    25. Terrence Hendershott & Charles M. Jones, 2005. "Island Goes Dark: Transparency, Fragmentation, and Regulation," The Review of Financial Studies, Society for Financial Studies, vol. 18(3), pages 743-793.
    26. Yan, Bingcheng & Zivot, Eric, 2010. "A structural analysis of price discovery measures," Journal of Financial Markets, Elsevier, vol. 13(1), pages 1-19, February.
    27. Wolfgang Bühler & Alexander Kempf, 1995. "Dax index futures: Mispricing and arbitrage in German markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 15(7), pages 833-859, October.
    28. Gang Shyy & Vasumathi Vijayraghavan & Brian Scott‐Quinn, 1996. "A further investigation of the lead‐lag relationship between the cash market and stock index futures market with the use of bid/ask quotes: The case of France," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(4), pages 405-420, June.
    29. Johansen, SØren, 2008. "A Representation Theory For A Class Of Vector Autoregressive Models For Fractional Processes," Econometric Theory, Cambridge University Press, vol. 24(3), pages 651-676, June.
    30. Alexander, Carol & Heck, Daniel F., 2020. "Price discovery in Bitcoin: The impact of unregulated markets," Journal of Financial Stability, Elsevier, vol. 50(C).
    31. Oliver Entrop & Bart Frijns & Marco Seruset, 2020. "The determinants of price discovery on bitcoin markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 816-837, May.
    32. Sean Foley & Jonathan R Karlsen & Tālis J Putniņš, 2019. "Sex, Drugs, and Bitcoin: How Much Illegal Activity Is Financed through Cryptocurrencies?," The Review of Financial Studies, Society for Financial Studies, vol. 32(5), pages 1798-1853.
    33. Johansen, Soren, 1995. "Identifying restrictions of linear equations with applications to simultaneous equations and cointegration," Journal of Econometrics, Elsevier, vol. 69(1), pages 111-132, September.
    34. Grunbichler Andreas & Longstaff Francis A. & Schwartz Eduardo S., 1994. "Electronic Screen Trading and the Transmission of Information: An Empirical Examination," Journal of Financial Intermediation, Elsevier, vol. 3(2), pages 166-187, March.
    35. Joel Hasbrouck, 2021. "Price Discovery in High Resolution," Journal of Financial Econometrics, Oxford University Press, vol. 19(3), pages 395-430.
    36. Jeff Fleming & Barbara Ostdiek & Robert E. Whaley, 1996. "Trading costs and the relative rates of price discovery in stock, futures, and option markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 16(4), pages 353-387, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Yu‐Lun Chen & J. Jimmy Yang, 2024. "Time‐varying price discovery in regular and microbitcoin futures," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(1), pages 103-121, January.
    2. Oliver Entrop & Bart Frijns & Marco Seruset, 2020. "The determinants of price discovery on bitcoin markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(5), pages 816-837, May.
    3. Zema, Sebastiano Michele, 2022. "Directed acyclic graph based information shares for price discovery," Journal of Economic Dynamics and Control, Elsevier, vol. 139(C).
    4. Sebastiano Michele Zema & Francesco Cordoni, 2023. "A non-Normal framework for price discovery: The independent component based information shares measure," LEM Papers Series 2023/03, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
    5. Chen, Wei-Peng & Chung, Huimin & Lien, Donald, 2016. "Price discovery in the S&P 500 index derivatives markets," International Review of Economics & Finance, Elsevier, vol. 45(C), pages 438-452.
    6. Alexander, Carol & Heck, Daniel F., 2020. "Price discovery in Bitcoin: The impact of unregulated markets," Journal of Financial Stability, Elsevier, vol. 50(C).
    7. Donald Lien & Zijun Wang, 2019. "Quantile information share," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(1), pages 38-55, January.
    8. Damien Wallace & Petko S. Kalev & Guanhua Lian, 2019. "The evolution of price discovery in us equity and derivatives markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(9), pages 1122-1136, September.
    9. Hu, Yang & Hou, Yang Greg & Oxley, Les, 2020. "What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying perspective?," International Review of Financial Analysis, Elsevier, vol. 72(C).
    10. Azhar Mohamad & Sarveshwar Kumar Inani, 2023. "Price discovery in bitcoin spot or futures during the Covid-19 pandemic? Evidence from the time-varying parameter vector autoregressive model with stochastic volatility," Applied Economics Letters, Taylor & Francis Journals, vol. 30(19), pages 2749-2757, November.
    11. Dimpfl, Thomas & Schweikert, Karsten, 2023. "Information shares for markets with partially overlapping trading hours," Journal of Banking & Finance, Elsevier, vol. 154(C).
    12. Muzhao Jin & Youwei Li & Jianxin Wang & Yung Chiang Yang, 2018. "Price discovery in the Chinese gold market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(10), pages 1262-1281, October.
    13. Erik Theissen, 2012. "Price discovery in spot and futures markets: a reconsideration," The European Journal of Finance, Taylor & Francis Journals, vol. 18(10), pages 969-987, November.
    14. Hou, Yang & Li, Steven, 2017. "Time-Varying Price Discovery and Autoregressive Loading Factors: Evidence from S&P 500 Cash and E-Mini Futures Markets," MPRA Paper 81999, University Library of Munich, Germany.
    15. Liwei Jin & Xianghui Yuan & Shihao Wang & Peiran Li & Feng Lian, 2022. "Trades or quotes: Which drives price discovery? Evidence from Chinese index futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(12), pages 2235-2247, December.
    16. Fassas, Athanasios P. & Papadamou, Stephanos & Koulis, Alexandros, 2020. "Price discovery in bitcoin futures," Research in International Business and Finance, Elsevier, vol. 52(C).
    17. Yang Hu & Yang (Greg) Hou & Les Oxley, 2019. "Spot and Futures Prices of Bitcoin: Causality, Cointegration and Price Discovery from a Time-Varying Perspective," Working Papers in Economics 19/13, University of Waikato.
    18. Yang Hou & Steven Li & Fenghua Wen, 2021. "Time-varying information share and autoregressive loading factors: evidence from S&P 500 cash and E-mini futures markets," Review of Quantitative Finance and Accounting, Springer, vol. 57(1), pages 91-110, July.
    19. Poutré, Cédric & Dionne, Georges & Yergeau, Gabriel, 2024. "The profitability of lead–lag arbitrage at high frequency," International Journal of Forecasting, Elsevier, vol. 40(3), pages 1002-1021.
    20. Shimeng Shi & Jia Zhai & Yingying Wu, 2024. "Informational inefficiency on bitcoin futures," The European Journal of Finance, Taylor & Francis Journals, vol. 30(6), pages 642-667, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:jfutmk:v:45:y:2025:i:4:p:269-288. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.interscience.wiley.com/jpages/0270-7314/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.