Professor Coin: How Crypto Derivatives Have Impacted Digital Markets

Professor Andrew Urquhart is a professor of finance and financial technology and head of the Finance Department at Birmingham Business School (BBS).

This is the sixth war Professor coin a column, in which I bring important insights from published academic literature on cryptocurrency currency in Decipher Reading. In this article, we will explore the cryptocurrency derivatives.

Bitcoin has crossed the obscure digital assets that are traded blockchain enthusiasts on one of the best -selling and most recognizable assets in the world – even become a The main theme of the discussion In the victory of Donald Trump’s presidential elections Subsequent Policy Drive.

They, together with other cryptocurrencies, have become more and more “financially” because they are more accepted in the financial system and trade in more and more institutional investors.

This enabled the introduction and success The future of Bitcoinoptions, futures etfs and Spot Bitcoin ETFSwhich allows investors to be exposed to Bitcoin without needed for Sabir BTC. This derivative asset also allows protection and sophisticated digital asset trading. But what impact do these derivative products have on digital markets?

Where is the price detection happen?

An important question of the introduction of derivative markets is where the pricing of prices comes from – is it on the derivative market or on the spot market?

Grabes and others (2020) Show that after the introduction of the Bitcoin Futures market on CME and CBOE, the Futures market plays a more important role in including new information on the price of bitcoin rather than a video. Therefore, the discovery of the price is now being carried out in the markets performed.

But what about unregulated derivatives? Alexander and others (2020) Study the leading irregular exchange of bitcoin derchoin, bitmex and show that their derivative prices lead to the main exchange of bitcoin video. Furthermore, bitmex derivatives are more effective than the price of prices and serve as an effective hedge in relation to volatility of the video price.

In further work, Alexander and Heck (2020) Show that eternal replacement and future trade on unregulated stock exchanges such as Huobi, Okex and Bitmex Price leaders and that prices on regulated derivatives (CME) respond to the lead, the movement of the prices of unregulated exchange.

However, recent work Frino and others (2025) You claim that the market market mainly leads to markets on the video, although this pricing leadership shows daily fluctuations.

The influence of bitcoin derivatives

In addition to leading prices, what effect they generally had derivatives on the Bitcoin market? Jalan and associates (2021) Document a clear impact down on the price of Bitcoin after their introduction, but the increase in the influence of volatility, therefore, showing the harmful effect of the introduction of the Future Agreement.

However, recent work Conlon and associates (2024) A document that CME Futures trading of volume is not a system of systemic risk and that the vast majority of risks come from the Bitcoin Spot market.

As Bitcoin Spot ETF influenced the markets

However, a great recent story in the news was the introduction Spot Bitcoin ETFS In January 2024 and how it affected markets. The emergence literature suggests a positive impact of their introduction on markets not only Bitcoin markets, but also on other crypto currencies, as the price increased and volatility has fallen, support the hypothesis on stabilization (Again Al 2025).

A very detailed study by Hornback and Whaley (2025) It shows that the inflow in the video ETF surpassed $ 75 billion, and their effect in relation to the future of Bitcoin and ETFs, which were based on the future, were nothing but extraordinary. Nevertheless, the study outlines the rather large differences between approved ETF in terms of management fees, monitoring of performance, composition and volatility.

More analyzes will come to the fore because time goes on to the impact of the introduction of the Spot ETF on the cryptocurrency market. Considering the events in the last 16 months and huge appearances in all the cryptocurrency derivatives, they offer a way of exposing cryptocurrencies with currencies, gaining protection options without the costs and hassle of custody.

As more derivatives are available, more and more institutional investors And traders will enter the market – and whether it is useful for the cryptocurrency market remains to be seen.

See for more information:

Alexander, C., Choi, J., Park, H., Sohn, S. (2020). BitMex Bitcoin Derivatives: Price detection, Information Efficiency and Efficiency of Protection. Journal of Futures Markets40, 23-43.

Alexander, C., Heck, DF (2020). Price detection in Bitcoin: The impact of unregulated markets. Financial Stability Journal50, 100776.

Babals, W., Boour, E., Gupta, R. (2025). Does the introduction of the American video Bitcoin ETF affects the yields of the video and the volatility of the main crypto currency? Three -month review of economics and finances102, 102006.

Conlon, T., Corbet, S., McGee, R. (2024). Volume-volatibility Relationship Bitcoin: Analysis of High Frequency of the Future and Exchange of Spots. International Review of Financial Analysis91, 103013.

Fassas, AP, Papadamou, S., Slider, A. (2020). Price detection in Bitcoin Future. International Business and Finance Research52, 10116.

Frino, A., Gaudiosi, R., Webb, Ri, Zhou, Zi (2025). Price detection in Bitcoin video or future? The jury is outside. Journal of Futures Markets45, 269-288.

Jalan, A., Matkovskyy, R., Urquhart, A. (2021). What effect did the introduction of Bitcoin futures on the Bitcoin Spot market? The European Finance Journal27, 1251-1281.

Hornback, A., Whaley, R. (2025) Spot Bitcoin Etfs: The fight was worth. Financial Analyst Journal81 (2), 1-12