JOURNAL ARTICLE

The Impact of Derivatives on Spot Markets: Evidence from the Introduction of Bitcoin Futures Contracts.

  • Published In: Management Science (INFORMS), 2023, v. 69, n. 11. P. 6752 1 of 3

  • Database: Business Source Ultimate 2 of 3

  • Authored By: Augustin, Patrick; Rubtsov, Alexey; Shin, Donghwa 3 of 3

Abstract

The article investigates the impact of the introduction of Bitcoin (BTC) futures contracts on the Bitcoin spot market, exploiting the unique setting where BTC–USD futures were selectively introduced in December 2017 by Cboe Global Markets and the Chicago Mercantile Exchange. Using a difference-in-differences framework comparing BTC–USD (treatment group) to other Bitcoin–fiat currency pairs (control groups), the study finds that the futures introduction significantly increased cross-exchange price synchronicity, price efficiency, market quality, and liquidity, while reducing volatility in the BTC–USD spot market. The evidence suggests that futures enabled investors to overcome arbitrage frictions related to short-sale constraints, block confirmation latency, and market segmentation, thereby making spot prices more informative. Additional analyses on Ethereum futures and cross-exchange Bitcoin flows support these findings, highlighting the role of centralized derivatives in improving spot market functioning under institutional frictions.

Additional Information

  • Source:Management Science (INFORMS). 2023/11, Vol. 69, Issue 11, p6752
  • Document Type:Article
  • Subject Area:Politics and Government
  • Publication Date:2023
  • ISSN:0025-1909
  • DOI:10.1287/mnsc.2023.4900
  • Accession Number:173603558
  • Copyright Statement:Copyright of Management Science (INFORMS) is the property of INFORMS: Institute for Operations Research & the Management Sciences and its content may not be copied or emailed to multiple sites without the copyright holder's express written permission. Additionally, content may not be used with any artificial intelligence tools or machine learning technologies. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

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