A study looking at the relationship between the price of bitcoin futures and spot has concluded that futures lead price discovery.
“The Bitcoin futures market is acting as a leading indicator and the Bitcoin spot market as a lagging indicator,” the authors say, adding:
“Thus, it is concluded that the price discovery is taking place between Bitcoin futures and the Bitcoin spot market.”
Bitcoin futures have risen on CME to $2 billion a day with bitcoin’s price currently being a bit higher on CME than on spot exchanges.
Futures overall tend to handle far more volumes than spot, in part because you can use leverage, with exchanges like BitMex offering as much as 100x.
That’s a quick way to lose your money, and most don’t cross 3x, the level generally afforded on CME.
Yet spot arguably should deal with the supply equation as if you don’t add bitcoin to the market, then in absurdum there is no price movement. The study nonetheless concludes:
“With the entrance of the new information in the cryptocurrency market, it is first observed in the Bitcoin futures followed by the Bitcoin spot prices.”
That’s probably because futures are mostly used by traders, maybe even as their day job, and thus they’re plugged into market moving news at all times.
It may also be because many of them manage funds on behalf of others, and thus might deal with bigger sums which might have a quicker effect on price.
But, bitcoin ownership continues to be mostly on the hands of the public, and thus arguably it is still the general public that ultimately decides price.