BitMEX Bitcoin derivatives: price discovery, informational efficiency and hedging effectiveness

Alexander, Carol, Choi, Jaehjuk, Heungji, Park and Sungbin, Song (2019) BitMEX Bitcoin derivatives: price discovery, informational efficiency and hedging effectiveness. Journal of Futures Markets. ISSN 0270-7314 (Accepted)

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Abstract

BitMEX is the largest unregulated bitcoin derivatives exchange, listing contracts suitable for leverage trading and hedging. Using minute-by-minute data, we examine its price discovery and hedging effectiveness. We find that BitMEX derivatives lead prices on major bitcoin spot exchanges. Bid-ask spreads, inter-exchange spreads and relative trading volumes are important determinants of price discovery. Further analysis shows that BitMEX derivatives have positive net spillover effects, are informationally more efficient than bitcoin spot prices, and serve as effective hedges against spot price volatility. Our evidence suggests that regulators prioritise investigation of the legitimacy of BitMEX and its contracts.

Item Type: Article
Keywords: bitcoin, BitMEX, market efficiency, price discovery, spillover
Schools and Departments: School of Business, Management and Economics > Business and Management
Subjects: H Social Sciences > HG Finance
H Social Sciences > HG Finance > HG0201 Money
H Social Sciences > HG Finance > HG3810 Foreign exchange. International finance. International monetary system
Depositing User: Carol Alexander
Date Deposited: 09 Aug 2019 10:37
Last Modified: 09 Aug 2019 10:45
URI: http://sro.sussex.ac.uk/id/eprint/85380

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