The post Professor Coin: How Crypto Derivatives Have Impacted Digital Markets appeared on BitcoinEthereumNews.com.

In brief Recent academic studies have found that Bitcoin price discovery now takes place in derivative markets rather than spot markets. Bitcoin prices on regulated derivative markets react to, rather than lead, price movements of unregulated exchanges. The introduction of spot Bitcoin ETFs has had a positive impact on the wider crypto market, studies found. Professor Andrew Urquhart is Professor of Finance and Financial Technology and Head of the Department of Finance at Birmingham Business School (BBS). This is the sixth instalment of the Professor Coin column, in which I bring important insights from published academic literature on cryptocurrencies to the Decrypt readership. In this article, we’ll investigate cryptocurrency derivatives. Bitcoin has gone from being an obscure digital asset traded by blockchain enthusiasts to one of the most traded and recognizable assets in the world—even becoming a major topic of discussion in Donald Trump’s U.S. presidential election victory and subsequent policy drive. It, along with other cryptocurrencies, have become more and more ‘financialized’ in that they are more accepted in the financial system and traded by more and more institutional investors. This has been enabled by the introduction and success of Bitcoin futures, options, futures ETFs and spot Bitcoin ETFs, which enable investors to gain exposure to Bitcoin without having to custody BTC themselves. These derivative assets also enable hedging and more sophisticated trading of digital assets. But what impact have these derivative products had on digital markets? Where does price discovery take place? One important issue with the introduction of derivative markets is where does price discovery originate—is it in the derivative market, or the spot market? Fassas et al (2020) show that, after the introduction of Bitcoin futures markets on the CME and CBOE, the futures market plays a more important role in incorporating new information about the…

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Filed under: News - @ May 27, 2025 10:22 pm