The IUP Journal of Applied Finance
An Analysis of Interactions Between Bitcoin Spot and Futures Markets

Article Details
Pub. Date : July, 2023
Product Name : The IUP Journal of Applied Finance
Product Type : Article
Product Code : IJAF020723
Author Name : Karamjeet Kaur
Availability : YES
Subject/Domain : Finance
Download Format : PDF Format
No. of Pages : 12



The study is an attempt to explore the long-run and short-run interactions between the Bitcoin spot and futures prices. The period of study is from December 18, 2017 to February 13, 2023. Unit root test, Johansen Cointegration test, VECM and Granger Causality test are applied for this analysis. The results of the study found the existence of cointegration between the Bitcoin spot and the futures market, indicating long-run relationship between the two markets. Further, unidirectional causality from the Bitcoin futures market to the Bitcoin spot market is found which implies that the Bitcoin futures market leads the spot market. Hence, Bitcoin futures market plays a role in the price discovery process.


Price discovery is the process by which market participants incorporate available information to determine equilibrium asset prices. If a single asset or multiple assets closely linked by arbitrage arguments are traded in several markets, each market might be contributing to the price discovery process (Kapar and Olmo, 2019). Theoretically, spot and futures markets should reflect new information simultaneously, so that there should be no systematic lagged responses. But due to market imperfections, new information is not timely incorporated in different markets.