What is the expected return on Bitcoin? Extracting the term structure of returns from options prices

Sean Foley, Simeng Li, Hamish Malloch and Jiri Svec

Economics Letters, 2022, vol. 210, issue C

Abstract: We infer the forward-looking Bitcoin risk premium from options contracts. Using data from 2018 to 2020, we show that the expected excess returns for Bitcoin are time-varying and significantly higher than in equities or gold, averaging almost 80% per annum. A temporal analysis of the term structure of Bitcoin risk premia reveals an upward sloping term structure during Bitcoin bull markets and downward sloping during Bitcoin bear markets.

Keywords: Bitcoin; Cryptocurrency; Expected return; Term structure; Risk premium (search for similar items in EconPapers)
JEL-codes: G13 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:210:y:2022:i:c:s0165176521004493

DOI: 10.1016/j.econlet.2021.110196

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