Trading and Arbitrage in Cryptocurrency Markets

Makarov, Igor and Schoar, Antoinette (2018) Trading and Arbitrage in Cryptocurrency Markets. SSRN Electronic Journal.

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Abstract

We study the e�ciency, price formation and segmentation of cryptocurrency markets. We document large, recurrent arbitrage opportunities in cryptocurrency prices relative to �at currencies across exchanges, which often persist for weeks. Price deviations are much larger across than within countries, and smaller between cryptocurrencies. Price deviations across countries co-move and open up in times of large appreciations of the Bitcoin. Countries that on average have a higher premium over the US Bitcoin price also see a bigger widening of arbitrage deviations in times of large appreciations of the Bitcoin. Finally, we decompose signed volume on each exchange into a common and an idiosyncratic component. We show that the common component explains up to 85% of Bitcoin returns and that the idiosyncratic components play an important role in explaining the size of the arbitrage spreads between exchanges.

Item Type: Article
Subjects: Main Topics > Bitcoin
Projects > BloSSom 2019
Main Topics > Crypto Currency
Main Topics > Economy
Divisions: Computer Science
Depositing User: Unnamed user with email richard.dabels@uni-rostock.de
Date Deposited: 03 Sep 2019 16:34
Last Modified: 03 Sep 2019 16:34
URI: http://blossom.informatik.uni-rostock.de/id/eprint/19

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