Bitcoin Volume-Volatility Relationship

This podcast analyzes the relationship between volume and volatility in Bitcoin's futures and spot markets, using high-frequency data. The authors find that unexpected trading volume in the spot markets is the main explanatory factor for systemic volatility, while futures volume on the CME has a limited or even stabilizing impact. Two methodologies are used to estimate volatility: one based on volume-weighted prices and the other on the CME Bitcoin Reference Rate methodology. The study concludes that Bitcoin's volatility is strongly associated with unexpected volumes in the spot markets and not with CME futures volumes. The results are considered robust across different data frequencies.