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Bitcoin futures: An effective tool for hedging cryptocurrencies

Helder Sebastião () and Pedro Godinho

Finance Research Letters, 2020, vol. 33, issue C

Abstract: In December 2017, the CBOE and CME launched bitcoin futures, arguing that, similar to other futures, these contracts would provide more price transparency, price discovery, and a risk management tool for bitcoin. Using daily data from several sources, this paper investigates the hedging properties of CBOE Bitcoin futures during the initial months of trading. The results point out that bitcoin futures are effective hedging instruments not only for bitcoin, but also for other major cryptocurrencies. Bitcoin futures can even cope with bitcoin tail risk, however they may leverage the existence of extreme losses for other currencies.

Keywords: Bitcoin; Cryptocurrency; Futures; Hedging (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 G23 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:33:y:2020:i:c:s1544612319301849

DOI: 10.1016/j.frl.2019.07.003

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