Study finds CME drives Bitcoin price, but it excludes stablecoin volumes

On Oct. 14, Wilshire Phoenix investment firm released its Efficient Price Discovery report, which detailed how CME Bitcoin futures impact Bitcoin price discovery.

The report also adds that studies on price formation often find that the futures markets lead most of the time, but this doesn't mean their conclusions about CME Bitcoin futures are absolute.

It is important to note that the Bitcoin held by Wilshire's fund will follow a BTC price index called the Bitcoin Reference Rate listed by the CME. In the report, Wilshire Phoenix explained that the CME Bitcoin Reference Rate is used to determine the price on which BTC futures contracts are cash-settled in U.S. dollars.

Even more worrisome is that the CME excludes the three leading exchanges from the Bitcoin Reference Rate.

There is enough evidence to support their conclusion that the CME Bitcoin futures lead price formation compared to regulated USD fiat exchanges.

The analysis does not disprove that Bitcoin price formation happens on Binance, Bitfinex, Huobi, or OKEx.

Institutional investors, principally those based in the U.S., may not be interested in less regulated exchange volumes or Bitcoin pricing in stablecoins, but that does not mean those are irrelevant for the price formation.

As for the retail investor, using a broader set of exchanges and pricing makes more sense to test price discovery for an asset like Bitcoin.

Are less-regulated exchanges inflating volumes by using market makers and large clients paying barely zero fees? Is Tether's volatility too high to even consider when attempting to determine whether it impacts Bitcoin price formation in USD? These are all valid questions that warrant further discussion and investigation.

A broader evaluation is necessary before concluding whether CME Bitcoin futures have the highest contribution to price discovery.