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How Futures Trading Changed Bitcoin Prices
Report

How Futures Trading Changed Bitcoin Prices

Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak and Patrick Shultz
FRBSF, 2018
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Editorial Rating

9

Qualities

  • Eye Opening
  • Overview
  • Engaging

Recommendation

With cryptocurrencies the latest speculative rage, traders in 2017 pushed bitcoin from less than $1,150 to almost $20,000 in a matter of months. But after hitting fresh highs, bitcoin’s price reversed and plummeted in early 2018. Economists Galina Hale, Arvind Krishnamurthy, Marianna Kudlyak and Patrick Shultz examine this phenomenon in the context of bitcoin futures trading that began in December 2017. While it never gives investment advice, getAbstract recommends this informative report to investors and traders interested in bitcoin’s ups and downs.

Take-Aways

  • In 2009, financial and technology innovation introduced the world to bitcoin, a digital currency created on the foundation of the distributed ledger known as blockchain. 
  • In 2017, bitcoin’s price rocketed from less than $1,150 to $19,511. The pricing pinnacle subsequently receded through the early months of 2018, with bitcoin’s value falling to less than $10,000.
  • Bitcoin’s decline coincided with the Chicago Mercantile Exchange’s opening of a futures market for bitcoin, which enabled bearish traders to take short positions.

About the Authors

Galina B. Hale, Marianna Kudlyak and Patrick Shultz are researchers at the Federal Reserve Bank of San Francisco. Arvind Krishnamurthy is a finance professor at the Stanford Graduate School of Business.

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