Did the Introduction of Bitcoin Futures Crash the Bitcoin Market at the End of 2017?

24 Pages Posted: 10 Jan 2019 Last revised: 19 Mar 2020

See all articles by Takahiro Hattori

Takahiro Hattori

University of Tokyo - Graduate School of Public Policy

Ryo Ishida

Ministry of Finance - Japan - Policy Research Institute

Date Written: February 1, 2019

Abstract

At the end of 2017, the Bitcoin price dropped significantly by around 70% over two months. Since the introduction of Bitcoin futures coincided with this market crash, the new financial instrument might have caused the market crash, the literature emphasizing that the futures enabled investors to easily take a short position and suggesting the selling pressure from futures could have potentially crashed the Bitcoin market. To evaluate this assumption, we investigate the empirical relationship between the futures trade and Bitcoin price by using high-frequency data. We find that the trade of Bitcoin futures was not significantly related to the returns on Bitcoin futures and spot returns. Therefore, we conclude Bitcoin futures did not lead to the crash of the Bitcoin market at the end of 2017.

Keywords: cryptocurrency, Bitcoin, futures, intraday data, vector autoregressive model

JEL Classification: G14, G12

Suggested Citation

Hattori, Takahiro and Ishida, Ryo, Did the Introduction of Bitcoin Futures Crash the Bitcoin Market at the End of 2017? (February 1, 2019). Available at SSRN: https://ssrn.com/abstract=3307977 or http://dx.doi.org/10.2139/ssrn.3307977

Takahiro Hattori (Contact Author)

University of Tokyo - Graduate School of Public Policy ( email )

Tokyo
Japan

Ryo Ishida

Ministry of Finance - Japan - Policy Research Institute ( email )

Kasumigaseki Chiyoda-ku
3-1-1
Tokyo, 100-8940
Japan

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