The role of binance in bitcoin volatility transmission

Alexander, Carol, Heck, Daniel F and Kaeck, Andreas (2022) The role of binance in bitcoin volatility transmission. Applied Mathematical Finance, 29 (1). pp. 1-32. ISSN 1350-486X

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We analyse high-frequency realized volatility dynamics and spillovers between centralized crypto exchanges that offer spot and derivative contracts for bitcoin against the US dollar or the stable coin tether. The tether-margined perpetual contract on Binance is clearly the main source of volatility, continuously transmitting strong flows to all other instruments and receiving very little volatility from other sources. We also find that crypto exchanges exhibit much higher interconnectedness when traditional Western stock markets are open. Especially during the US time zone, volatility outflows from Binance are much higher than at other times, and Bitcoin traders are more attentive and reactive to prevailing market conditions. Our results highlight that market regulators should pay more attention to the tether-margined derivatives products available on most self-regulated exchanges, most importantly on Binance.

Item Type: Article
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 13 Jan 2023 11:17
Last Modified: 03 Feb 2023 11:30

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