Price discovery between Bitcoin spot markets and exchange traded products

Roland Gemayel; Tatiana Franus; James Bowden

doi:10.1016/j.econlet.2023.111152

Price discovery between Bitcoin spot markets and exchange traded products

Roland Gemayel^*, Tatiana Franus, James Bowden

^*Corresponding author for this work

Accounting & Financial Management

Research output: Contribution to journal › Article › peer-review

3 Citations (Scopus)

7 Downloads (Pure)

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.

Original language	English
Article number	111152
Journal	ECONOMICS LETTERS
Volume	228
Early online date	11 May 2023
DOIs	https://doi.org/10.1016/j.econlet.2023.111152
Publication status	Published - Jul 2023

Keywords

Bitcoin
Cryptocurrency
Exchange-traded products
Market efficiency
Price discovery

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10.1016/j.econlet.2023.111152

Price discovery between Bitcoin_Gemayel_publishedonline11May2023_Green_AAMAccepted author manuscript, 312 KBLicence: CC BY

https://pureportal.strath.ac.uk/en/publications/price-discovery-between-bitcoin-spot-markets-and-exchange-traded-

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title = "Price discovery between Bitcoin spot markets and exchange traded products",

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.",

keywords = "Bitcoin, Cryptocurrency, Exchange-traded products, Market efficiency, Price discovery",

author = "Roland Gemayel and Tatiana Franus and James Bowden",

note = "Funding Information: ☆ This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. We would like to thank the anonymous referee for the valuable comments that helped us improve the quality of the paper. Publisher Copyright: {\textcopyright} 2023 Elsevier B.V.",

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language = "English",

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TY - JOUR

T1 - Price discovery between Bitcoin spot markets and exchange traded products

AU - Gemayel, Roland

AU - Franus, Tatiana

AU - Bowden, James

N1 - Funding Information: ☆ This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors. We would like to thank the anonymous referee for the valuable comments that helped us improve the quality of the paper. Publisher Copyright: © 2023 Elsevier B.V.

PY - 2023/7

Y1 - 2023/7

N2 - 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.

AB - 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.

KW - Bitcoin

KW - Cryptocurrency

KW - Exchange-traded products

KW - Market efficiency

KW - Price discovery

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DO - 10.1016/j.econlet.2023.111152

M3 - Article

AN - SCOPUS:85158043793

SN - 0165-1765

VL - 228

JO - ECONOMICS LETTERS

JF - ECONOMICS LETTERS

M1 - 111152

ER -

Price discovery between Bitcoin spot markets and exchange traded products

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