Arbitrage, contract design, and market structure in Bitcoin futures markets

Perpetual futures, first proposed by Shiller (1993), have only seen wide use in cryptocurrency markets. We examine the contract design and market microstructure differences for the behavior of Bitcoin quarterly and perpetual futures prices and assess the implications for market participants and policymakers. We find perpetual futures exhibit multiple “u-shaped” curves, seasonal effects, and opening effects despite lacking opening and closing hours. There is suggestive evidence of spillover effects between perpetual and quarterly futures contracts. We find quarterly futures offer cash-and-carry arbitrage opportunities, but similar to Hattori and Ishida (2021) these opportunities primarily exist during market dislocations.