Fragmentation in the Bitcoin Market: Evidence From Multiple Coexisting Order Books

20 Pages Posted: 4 Aug 2020

See all articles by Yoontae Jeon

Yoontae Jeon

McMaster University - Michael G. DeGroote School of Business

Laleh Samarbakhsh

Ryerson University - Ted Rogers School of Management

Kenji Hewitt

affiliation not provided to SSRN

Date Written: June 2020

Abstract

We explore the consolidated order book of five major exchanges to investigate how fragmentation affects the Bitcoin market. Using intraday snapshots of the order book data, we find that the Bitcoin market is quite fragmented, wherein the exchange liquidity measure is significantly negative, even for small transactions. Our results suggest that consolidation tools, such as smart order routers, can be effective in reducing the cost of trading, and that further development of the Bitcoin market’s trading and regulation is needed.

Keywords: bitcoin, fragmented market, market micro-structure, smart order router

JEL Classification: C58, G14, G15

Suggested Citation

Jeon, Yoontae and Samarbakhsh, Laleh and Hewitt, Kenji, Fragmentation in the Bitcoin Market: Evidence From Multiple Coexisting Order Books (June 2020). Finance Research Letters, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3645333 or http://dx.doi.org/10.2139/ssrn.3645333

Yoontae Jeon

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Laleh Samarbakhsh (Contact Author)

Ryerson University - Ted Rogers School of Management ( email )

Toronto, ON
Canada

Kenji Hewitt

affiliation not provided to SSRN

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