Ethereum futures and the efficiency of cryptocurrency spot markets

Werner Kristjanpoller, Ramzi Nekhili and Elie Bouri

Physica A: Statistical Mechanics and its Applications, 2024, vol. 654, issue C

Abstract: This paper examines the impact of the introduction of Ethereum futures contracts on the market efficiency of major cryptocurrency (Bitcoin, Ethereum, Ripple, Litecoin, and Dogecoin) spot prices. Using a multifractality-based approach and daily data from September 4, 2017 to February 16, 2024, the main results show a slight improvement in market efficiency. Specifically, the degree of multifractality persistence decreases, implying reduced market inefficiencies in major cryptocurrencies. The temporal linear correlation effect and thick tail effect are less pronounced post-launch. The asymmetry of the generalized Hurst exponent increases after the launch of Ethereum futures, with a higher persistence under the downward trend of cryptocurrencies noted. This downward trend emerges after the launch of Ethereum futures, coinciding with the final stage of the COVID-19 pandemic. Additional analysis shows that fat tails and temporal linear correlations are the main sources of multifractality. The results highlight the influence of introducing financial derivatives into the relatively new and volatile cryptocurrency area, which should concern traders, hedgers, investors, and regulators.

Keywords: Ethereum futures; Bitcoin; Cryptocurrency markets: multifractality; COVID-19; Market efficiency (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:654:y:2024:i:c:s0378437124006708

DOI: 10.1016/j.physa.2024.130161

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