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The Speculative (In)Efficiency of the CME Bitcoin Futures Market

In: Mathematical Research for Blockchain Economy

Author

Listed:
  • Toshiko Matsui

    (Imperial College London)

  • Lewis Gudgeon

    (Imperial College London)

Abstract

The launch of Bitcoin futures on the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) in December 2017 marked a notable milestone in the development of cryptoassets. Yet while the speculative efficiency of commodity markets has been extensively investigated, relatively little analysis has been undertaken on the speculative efficiency of Bitcoin markets. In this paper we investigate the speculative efficiency of the Bitcoin market, leveraging an approach based on non-overlapping data samples, which has been previously employed to the same end in the context of the London Metal Exchange (LME). Using non-overlapping data on Bitcoin spot and futures prices as traded on the CME, we find that the 1-month futures price is not an unbiased predictor of the spot price, suggesting that the market is inefficient: it may be possible for a speculator to make excess returns. In contrast, with 2-week and 1-week futures we are unable to reject the null hypothesis of market efficiency. Moreover, we find that the futures price becomes a more accurate indicator of the spot price as the futures contract becomes shorter.

Suggested Citation

  • Toshiko Matsui & Lewis Gudgeon, 2020. "The Speculative (In)Efficiency of the CME Bitcoin Futures Market," Springer Proceedings in Business and Economics, in: Panos Pardalos & Ilias Kotsireas & Yike Guo & William Knottenbelt (ed.), Mathematical Research for Blockchain Economy, pages 91-103, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-53356-4_6
    DOI: 10.1007/978-3-030-53356-4_6
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