The impact of index futures crash risk on bitcoin futures returns and volatility

Chia-Hsien Tang; Yen-Hsien Lee; Ya-Ling Huang; You-Xuan Liu

doi:10.1016/j.heliyon.2024.e24126

The impact of index futures crash risk on bitcoin futures returns and volatility

Heliyon. 2024 Jan 8;10(2):e24126. doi: 10.1016/j.heliyon.2024.e24126. eCollection 2024 Jan 30.

Authors

Chia-Hsien Tang¹, Yen-Hsien Lee², Ya-Ling Huang³, You-Xuan Liu²

Affiliations

¹ Economics and Management Department, Guangxi Minzu Normal University, Chongzuo, Guangxi, China.
² College of Business, Department of Finance, Chung Yuan Christian University, Taiwan.
³ Department of Golden-Ager Industry Management, Chaoyang University of Technology, Taiwan.

Abstract

This study examines the relationship between E-mini S&P 500 futures' crash risk and Bitcoin futures' returns and volatility using data from 2017 to 2021. While E-mini S&P 500's crash risk doesn't significantly influence Bitcoin returns, it correlates with its volatility, especially during events like the COVID-19 pandemic and U.S. elections. Furthermore, as global and emerging market indices rise, Bitcoin futures volatility decreases, suggesting its role as a hedging tool. These findings are pivotal for investors aiming to construct informed trading strategies, leverage Bitcoin futures as a hedging asset during economic instability, and keep tabs on traditional market indicators like E-mini S&P 500 crash risk for anticipating fluctuations in Bitcoin futures.

Keywords: Bitcoin futures; COVID-19; Crash risk; Index futures; Returns volatility.