Volatility Spillovers from Binance Bitcoin Perpetuals

Summary

This study analyzes high-frequency realized volatility and its transmission among bitcoin instruments, comparing bitcoin quoted in US dollars with bitcoin traded against tether. It finds that Binance's tether-margined perpetual contract is the dominant source of volatility spillovers, transmitting substantial volatility to other instruments while receiving relatively little.

The analysis also reports stronger market responsiveness during US trading hours and greater crypto-market interconnectedness when Western stock markets are open. These findings point to the importance of derivatives venues when studying bitcoin volatility and considering oversight. The supplied description does not specify the sample period, estimation details, or robustness checks, so the stated relationships should be read as study findings rather than universal causal conclusions.

Key ideas

• The analysis compares bitcoin-dollar and bitcoin-tether market volatility dynamics.
• Binance's tether-margined perpetual is identified as the strongest volatility transmitter among the studied instruments.
• Market participants appear more responsive to conditions during US trading hours.
• Crypto-market interconnectedness rises when Western stock markets are open.
• The findings suggest that regulators should account for crypto derivatives venues as well as fiat-crypto spot exchanges.

Tags

# The Role of Binance in Bitcoin Volatility Transmission


# The Role of Binance in Bitcoin Volatility Transmission









We analyse high-frequency realised volatility dynamics and spillovers in the bitcoin market, focusing on two pairs: bitcoin against the US dollar (the main fiat-crypto pair) and trading bitcoin against tether (the main crypto-crypto pair). We find that the tether-margined perpetual contract on Binance is clearly the main source of volatility, continuously transmitting strong flows to all other instruments and receiving only a little volatility. Moreover, we find that (i) during US trading hours, traders pay more attention and are more reactive to prevailing market conditions when updating their expectations and (ii) the crypto market exhibits a higher interconnectedness when traditional Western stock markets are open. Our results highlight that regulators should not only consider spot exchanges offering bitcoin-fiat trading but also the tether-margined derivatives products available on most unregulated exchanges, most importantly Binance.

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.