What role do futures markets play in Bitcoin pricing? Causality, cointegration and price discovery from a time-varying perspective?

Recent papers that have explored spot and futures markets for Bitcoin have concluded that price discovery takes place either in the spot, or the futures market. Here, we consider the robustness of previous price discovery conclusions by investigating causal relationships, cointegration and price discovery between spot and futures markets for Bitcoin, using appropriate daily data and time-varying mechanisms. We apply the time-varying Granger causality test of Shi, Phillips, and Hurn [2018]; time-varying cointegration tests of Park and Hahn [1999], and time-varying information share methodologies, concluding that futures prices Granger cause spot prices and that futures prices dominate the price discovery process. [Display omitted] •We find that Bitcoin futures prices Granger-cause Bitcoin spot prices•The results are based on daily data and allow for time varying mechanisms•We utilise the new time varying test Granger-causality of Shi et al. (2018)•We utilise the new time varying cointegration test of Park and Hahn (1999)•We use the correct Bitcoin spot prices for the CBOE and CME futures contract prices