{"id":93715,"date":"2020-10-20T22:28:24","date_gmt":"2020-10-20T19:28:24","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes\/"},"modified":"2020-10-20T22:28:24","modified_gmt":"2020-10-20T19:28:24","slug":"study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes\/","title":{"rendered":"# Study finds CME drives Bitcoin price, but it excludes stablecoin volumes"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_85 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3d822cd88be\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3d822cd88be\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes\/#The_CME_index_is_missing_key_%E2%80%98ingredients\" >The CME index is missing key &#8216;ingredients&#8217;<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/buradabiliyorum.com\/en\/study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes\/#Stablecoin_impact_on_price_formation_has_not_been_tested\" >Stablecoin impact on price formation has not been tested<\/a><\/li><\/ul><\/nav><\/div>\n<p>&#8220;<strong># Study finds CME drives Bitcoin price, but it excludes stablecoin volumes   <\/strong>&#8221;<\/p>\n<div data-v-5a136f3a=\"\">On Oct. 14, Wilshire Phoenix investment firm <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.wilshirephoenix.com\/efficient-price-discovery-in-the-bitcoin-markets\/\">released its Efficient Price Discovery report<\/a>, which detailed how CME Bitcoin (BTC) futures impact Bitcoin price discovery.<\/p>\n<p>The firm concluded that &#8220;CME Bitcoin futures contribute more to price discovery than its related spot markets.&#8221; And the researchers also suggested that:<\/p>\n<blockquote><p>&#8220;CME Bitcoin futures have grown to become significant, this is not only demonstrated through trading volume and open interest, but also by influence on spot price formation.&#8221;<\/p><\/blockquote>\n<p>Wilshire&#8217;s analysis correctly states that price discovery in traditional markets is a contested topic. The report also adds that <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.osti.gov\/etdeweb\/servlets\/purl\/20243776\">studies on price formation<\/a> often find that the futures markets lead most of the time, but this doesn&#8217;t mean their conclusions about CME Bitcoin futures are absolute.<\/p>\n<p>According to the report, CME Group, the leading derivatives venue, trades $5.15 trillion per day across its multiple markets. According to Nasdaq data, this number compares to the $430 billion in daily volume seen in the U.S. stock market.<\/p>\n<p>This data shows that the trend of derivatives volumes surpassing spot exchanges by tenfold is the norm rather than an exception.<\/p>\n<p><template data-name=\"subscription_form\" data-type=\"markets_outlook\"\/><\/p>\n<h2><span class=\"ez-toc-section\" id=\"The_CME_index_is_missing_key_%E2%80%98ingredients\"><\/span>The CME index is missing key &#8216;ingredients&#8217;<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>U.S. Securities and Exchange (SEC) documents show that In June, Wilshire Phoenix filed for a publicly tradable Bitcoin-backed fund similar to the Grayscale Bitcoin Trust. <\/p>\n<p>It is important to note that the Bitcoin held by Wilshire&#8217;s fund will follow a BTC price index called the Bitcoin Reference Rate (BRR) listed by the CME.<\/p>\n<p>In the report, Wilshire Phoenix explained that the CME Bitcoin Reference Rate (BRR) is used to determine the price on which BTC futures contracts are cash-settled in U.S. dollars. <\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/4e337c7d-6651-4499-a5c8-a890c9eb2f7d.png\"\/><figcaption style=\"text-align: center;\"><em>CME Bitcoin Reference Rate constituents. Source: Wilshire Phoenix<\/em><\/figcaption><\/figure>\n<p>For CME and aspirant funds based in the U.S., it might make sense to exclude stablecoin volumes and focus on more regulated exchanges. Even if Bitcoin price discovery does not h<a href=\"https:\/\/buradabiliyorum.com\/en\/category\/download-scripts-themes-apps\/\" data-internallinksmanager029f6b8e52c=\"9\" title=\"Download Scripts &amp; Themes &amp; Apps\" target=\"_blank\" rel=\"noopener\">app<\/a>en there, <a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/www.sec.gov\/comments\/sr-nysearca-2019-01\/srnysearca201901-5164833-183434.pdf\">arbitrage efficiency has grown over the years<\/a>, according to a 2019 Bitwise Investments report. <\/p>\n<p>Analysis from Bitwise found that &#8220;arbitrage between these ten exchanges is virtually perfect.&#8221; Therefore, by not having sustained price discrepancies, the CME reference index can comfortably select a handful of exchanges, excluding the top three.<\/p>\n<p>Although the latest Bitwise Bitcoin ETF proposal has been withdrawn, its price formation was different from its competitors. Using a broader base, it also included stablecoin based exchanges.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/7db0c16c-b36a-4e9c-8ba0-adc1ca6f6ee3.png\"\/><figcaption style=\"text-align: center;\"><em>Bitwise Bitcoin ETF proposal, March 2019. Source: Bitwise Investments<\/em><\/figcaption><\/figure>\n<p>Those familiar with cryptocurrency markets will know that stablecoin market caps, trading volumes, altcoin pairings, and their impact on the crypto market have increased immensely over the past two years.<\/p>\n<p>Not only has the stablecoin market capitalization risen eightfold to $21 billion in the past two years, but the dominance of stablecoin pairs and their trading volumes have also grown significantly.<\/p>\n<figure><img decoding=\"async\" src=\"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/2401c070-5608-442a-bc9c-1b3659b97806.png\"\/><figcaption style=\"text-align: center;\"><em>Messari<\/em>&#8216;<em>s Bitcoin <\/em>\u201c<em>Real Volume\u201d. Source: <\/em><a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/messari.io\/screener\"><em>Messari.io<\/em><\/a><\/figcaption><\/figure>\n<p>Take notice of how the top Bitcoin pairs are Tether (USDT) based. Even more worrisome is that the CME excludes the three leading exchanges from the Bitcoin Reference Rate. <\/p>\n<p>The above data leads to a significant difference in exchanges&#8217; selection from more inclusive indexes such as Bitwise\u2019s \u2018Real Bitcoin Trade Volume\u2019, Messari\u2019s \u2018Real Volume\u2019, and Nomics \u2018Transparent Volume\u2019. Regardless of the reasons behind CME\u2019s exchange selection, its BRR index excludes the top three exchanges, according to Messari\u2019s 24-hour data.<\/p>\n<h2><span class=\"ez-toc-section\" id=\"Stablecoin_impact_on_price_formation_has_not_been_tested\"><\/span>Stablecoin impact on price formation has not been tested<span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>Wilshire Phoenix\u2019s report is a step in the right direction, and the study has an impeccable methodology. There is enough evidence to support their conclusion that the CME Bitcoin futures lead price formation compared to regulated USD fiat exchanges.<\/p>\n<p>Although well-executed, the analysis does not disprove that Bitcoin price formation happens on Binance, Bitfinex, Huobi, or OKEx. Institutional investors, principally those based in the U.S., may not be interested in less regulated exchange volumes or Bitcoin pricing in stablecoins, but that does not mean those are irrelevant for the price formation.<\/p>\n<p>As for the retail investor, using a broader set of exchanges and pricing makes more sense to test price discovery for an asset like Bitcoin. This conclusion is not equivalent to stating that CME&#8217;s Bitcoin Reference Rate is wrong or easily manipulated. <\/p>\n<p>Are less-regulated exchanges inflating volumes by using market makers and large clients paying barely zero fees? Is Tether\u2019s volatility too high to even consider when attempting to determine whether it impacts Bitcoin price formation in USD? These are all valid questions that warrant further discussion and investigation.<\/p>\n<p>Therefore, a broader evaluation is necessary before concluding whether CME Bitcoin futures have the highest contribution to price discovery.<\/p>\n<p><em>The views and opinions expressed here are solely those of the <\/em><a rel=\"nofollow noopener noreferrer\" target=\"_blank\" href=\"https:\/\/twitter.com\/noshitcoins\"><em>autho<\/em><em>r<\/em><\/a><em> and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.<\/em><\/p>\n<\/div>\n<p><script async src=\"\/\/platform.twitter.com\/widgets.js\" charset=\"utf-8\"><\/script><\/p>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener noreferrer\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong>\n<\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/general\/\" target=\"_blank\" rel=\"noopener noreferrer\">General category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/cointelegraph.com\/news\/study-finds-cme-drives-bitcoin-price-but-it-excludes-stablecoin-volumes\" target=\"_blank\" rel=\"noopener noreferrer\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;# Study finds CME drives Bitcoin price, but it excludes stablecoin volumes &#8221; On Oct. 14, Wilshire Phoenix investment firm released its Efficient Price Discovery report, which detailed how CME Bitcoin (BTC) futures impact Bitcoin price discovery. The firm concluded that &#8220;CME Bitcoin futures contribute more to price discovery than its related spot markets.&#8221; And&#8230;<\/p>\n","protected":false},"author":1,"featured_media":93716,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/s3.eu-central-1.amazonaws.com\/s3.cointelegraph.com\/uploads\/2020-10\/24080fc4-0fce-4575-a494-2aa829bd1200.jpg","fifu_image_alt":"","footnotes":""},"categories":[1],"tags":[74862,74972,74937,75845,74863,74939,75493,73785],"class_list":["post-93715","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-bitcoin","tag-bitcoin-futures","tag-bitcoin-price","tag-cme","tag-cryptocurrencies","tag-market-analysis","tag-stablecoin","tag-markets"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/93715","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=93715"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/93715\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/93716"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=93715"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=93715"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=93715"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}