The regulated tail that wags the honey badger : researching price discovery in bitcoin, identifying the leading instruments, and examining the impact of the regulated futures market.
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- Master Thesis 
In this thesis, we examine the process of how new information is impounded into the market, more commonly known as the price discovery process. We used GIS by Lien & Shrestha (2014) and identified the most relevant and important markets in bitcoin’s price discovery process. We analyzed the GIS within various markets using minute-by-minute market close data from 21 different bitcoin pairs from June 1, 2020, until April 30, 2021. First, we analyzed the GIS in the spot market. The results suggest that Binance’s stablecoin denominated pair leads the spot market, with Coinbase in a close second. Second, we analyzed the GIS in the unregulated futures market. Our results indicate that Huobi and OKEx futures lead the unregulated futures market. Third, we analyzed the GIS in the perpetual swaps market. We found indications that Binance’s linear perpetual swap is the leading instrument in the perpetual swap market. We then analyzed the leaders from each group, in addition to CME bitcoin futures. The results from this analysis suggest that the unregulated futures on Huobi and OKEx tend to lead the market. However, we observed trends of substantial price discovery taking place on both the CME futures and the Binance perpetual swap contract. We identified a more pronounced leading role of the CME bitcoin futures than found in previous literature following the same methodology, suggesting that the regulated futures market has become an important part of bitcoin’s price discovery.