Futures-Led Price Discovery in Bitcoin Markets: Evidence from Cointegration, Regime Shifts, and Dynamic Transmission Analysis

This study investigates price discovery dynamics between Bitcoin spot and futures markets using daily data from December 2017 to January 2026. An integrated econometric framework is employed, combining cointegration analysis, error correction modelling, structural break detection, and dynamic transmission techniques. The results confirm a strong long-run equilibrium relationship, with the error correction mechanism indicating rapid adjustment in the spot market and weak exogeneity in futures markets. Structural break analysis identifies two significant breakpoints, partitioning the sample into three economically meaningful regimes: (i) the pre-COVID phase, (ii) the COVID-driven market disruption period, and (iii) the post-COVID phase characterised by increasing institutional maturity. Regime-specific estimations reveal that futures-led price discovery persists consistently across all market phases. Impulse response functions show that shocks originating in futures markets generate strong and persistent responses in spot prices, while forecast error variance decomposition indicates that futures innovations account for the majority of spot price variability. Overall, the findings provide robust evidence of stable and dominant futures-led price discovery, offering important implications for market efficiency, trading strategies, and regulatory oversight in evolving cryptocurrency markets.