Abstract
We analyse high-frequency realised volatility dynamics and spillovers in the bitcoin market, focusing on two pairs: bitcoin against the US dollar (the main fiat-crypto pair) and trading bitcoin against tether (the main crypto-crypto pair). We find that the tether-margined perpetual contract on Binance is clearly the main source of volatility, continuously trans- mitting strong flows to all other instruments and receiving only a little volatility. Moreover, we find that (i) during US trading hours, traders pay more attention and are more reac- tive to prevailing market conditions when updating their expectations and (ii) the crypto market exhibits a higher interconnectedness when traditional Western stock markets are open. Our results highlight that regulators should not only consider spot exchanges offer- ing bitcoin-fiat trading but also the tether-margined derivatives products available on most unregulated exchanges, most importantly Binance.
Submitted July 06, 2021 at 08:53AM by AwesomeMathUse https://ift.tt/3jN66UR
