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Causal Effects of Bitcoin Futures Launches on Volatility and Volume

Article arXiv papers · Author: Fiammetta Menchetti et al.
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Summary

The study asks whether the introduction of regulated Bitcoin futures affected Bitcoin volatility and trading volume. It focuses on the contracts launched by CBOE and CME in December 2017 and applies a causal time-series approach called C-ARIMA. The document reports that the CME contract launch increased both outcomes, and finds evidence of a positive relationship between volume and volatility.

The authors also examine whether volume helps explain the volatility response. They attribute part of the volatility increase to the additional trading volume associated with the contract launch, while reporting that the estimated CME effect remained more than twice as large after controlling for volume. These are causal estimates from the study’s approach, but the summary supplies no sample period, model specification, uncertainty measures, or comparison details. It reports no corresponding positive effect from CBOE, so the stated conclusion should be read as specific to the CME findings rather than generalized to every futures launch.

Key ideas

  • The study uses C-ARIMA to estimate the causal impact of regulated Bitcoin futures launches.
  • It reports that the CME launch increased Bitcoin volatility and trading volume.
  • The analysis finds a positive relationship between Bitcoin volume and volatility.
  • Higher volume accounts for part of the estimated volatility response.
  • After controlling for volume, the reported CME volatility effect remains more than twice as large.

Tags

CryptoFuturesVolatilityStatistics
Full text
# Causal effect of regulated Bitcoin futures on volatility and volume


# Causal effect of regulated Bitcoin futures on volatility and volume









In December 2017, two leading derivative exchanges, CBOE and CME, introduced the first regulated Bitcoin futures. Our aim is estimating their causal impact on Bitcoin volatility and trading volume. Employing a new causal approach, C-ARIMA, we find that the CME future triggered an increase in both outcomes. There is also evidence of a positive volume-volatility relationship and that the effect on volatility was partially due to the higher trading volumes induced by the launch of the contract. After controlling for the effect on volumes, we find that the CME instrument caused Bitcoin volatility to increase by more than double.

Shown in full with attribution under the source's licence. Licence: abstract CC0

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.