Bitcoin futures impact price more than spot markets: Wilshire Phoenix

A new report from investment firm Wilshire Phoenix claims that the Chicago Mercantile Exchange's, or CME's, cash-settled Bitcoin futures trading products affect Bitcoin's price even though they do not directly involve actual real Bitcoin.

Price discovery essentially refers to how each actual Bitcoin is valued on the market - its going market rate, or spot price.

Launched in December 2017, CME's Bitcoin futures do not handle spot Bitcoin.

Participants trade contracts tracking the price of Bitcoin on the crypto markets, paying out those contracts into U.S. dollars at expiration.

These contracts pay out based on a price index called the CME CF BRR, which comprises a price for BTC based on values seen across a number of spot crypto exchanges, called constituent exchanges.

Even though the CME's Bitcoin futures deal only in cash, crypto traders and participants pay attention to their price action - particularly chart gaps frequently referred to as "CME gaps".

Bitcoin's spot price has been known to travel back to any gaps left on the price chart.

"A relative number of small trades in a given market is typically statistically insignificant for price discovery purposes. The average trade size on the CME futures market facilitates its lead in price discovery versus the Constituent Exchanges."

The report also noted the presence of other mainstream futures markets affecting spot prices across other asset classes, so the findings are not out of the ordinary.

"There are 85 institutions holding open positions in Bitcoin futures, this represents a similar number versus other CME futures in major currency markets such as the Swiss Franc, US Dollar Index, and Fed Funds," Wilshire Phoenix partner and report co-author Alexander Chang told Cointelegraph.