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What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a
Yang Hu1, Yang Greg Hou1, Les Oxley1
1School of Accounting, Finance and Economics, University of Waikato, New Zealand.
Abstract:
Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi, Phillips, and Hurn [2018]; time-varying cointegration tests of Park and Hahn [1999], and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process.
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