Effect of introducing Bitcoin futures on the underlying Bitcoin market efficiency: A multifractal analysis

This paper investigates the effect of introducing Bitcoin futures on Bitcoin spot market efficiency from the perspective of multifractality. We show that, after the introduction of Bitcoin futures, the fractal characteristics of Bitcoin spot market are weakened, suggesting that introducing Bitcoin f...

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Bibliographic Details
Published in:Chaos, solitons and fractals solitons and fractals, 2021-12, Vol.153, p.111576, Article 111576
Main Authors: Ruan, Qingsong, Meng, Lu, Lv, Dayong
Format: Article
Language:English
Subjects:
Bitcoin
Bitcoin futures
Market efficiency
MF-X-DMA
Nonlinear Granger causality test
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Summary:This paper investigates the effect of introducing Bitcoin futures on Bitcoin spot market efficiency from the perspective of multifractality. We show that, after the introduction of Bitcoin futures, the fractal characteristics of Bitcoin spot market are weakened, suggesting that introducing Bitcoin futures help enhance market efficiency of Bitcoin spot market. We further use MF-X-DMA analysis and nonlinear Granger causality test to identify the source of increased spot-market efficiency. Results show that the cross-correlation between Bitcoin spot and futures returns is statistically significantly positive, and that the Bitcoin futures market and spot market has a two-way nonlinear Granger causality. Our results provide evidence that the price discovery in Bitcoin futures market help improve price efficiency of Bitcoin spot market efficiency.
ISSN:0960-0779
1873-2887
DOI:10.1016/j.chaos.2021.111576