Price-Volume Relationship in Bitcoin Futures ETF Market: An Information Perspective

Abstract

Bitcoin futures exchange-traded funds (ETFs) are recent innovations in cryptocurrency investment. This article studies the price-volume relationship in this market from an information perspective. We first propose effective mutual information which has better estimation accuracy to analyze the contemporaneous relationship. Using half-hourly trading data of the world’s largest Bitcoin futures ETF, we find that trading volume changes and returns contain information about each other and are contemporaneously dependent. Then, we employ effective transfer entropy to examine the intertemporal relationship. The results show that there exists information transfer from volume changes to returns in most of our sample period, suggesting the presence of return predictability and market inefficiency. However, information transfer in the opposite direction occurs much less frequently, and the amount is typically smaller.

How Much Bitcoin Should We Allocate to the Portfolio?

“…Regulated futures trading on Bitcoin was launched by the Chicago Board Options Exchange (CBOE) on December 10, 2017, followed closely by the Chicago Mercantile Exchange (CME) on December 18, 2017. Secondly, on October 19, 2021, another milestone was reached with the launch of the first Bitcoin futures exchangetraded fund (BITO) (Xudong Wang and Xiaofeng Hiu, 2024). Introducing a Bitcoin futures ETF represented an important step towards mainstream acceptance of cryptocurrencies within traditional financial markets.…”