Are Bitcoin option traders speculative or informed?

Wang Chun Wei, Dimitrios Koutmos and Min Zhu

Finance Research Letters, 2024, vol. 67, issue PA

Abstract: Are Bitcoin option traders speculative or do they have an informational advantage over the market? We explore this question using tick data from Deribit, one of the largest cryptocurrency option exchange platforms. Compared to other option platforms, Deribit is largely unregulated and makes for an ideal testing ground for this question. This is because if there are traders who possess privileged information, this platform would be an ideal venue for them to exploit their informational advantage. Our analytical framework allows for checking whether option traders trade ahead of changes in investor attention, or whether such trading lags abnormal spikes in investor attention. The former would suggest information-driven trading while the latter would suggest that such trading is speculative or noise-driven in nature.

Keywords: Bitcoin; Cryptocurrency; Informational trading; Investor attention; Option trading (search for similar items in EconPapers)
JEL-codes: C5 G1 G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:67:y:2024:i:pa:s1544612324007694

DOI: 10.1016/j.frl.2024.105739

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