Bitcoin Market Microstructure
25 Pages Posted: 11 Apr 2017
Date Written: April 10, 2017
Bitcoin is traded on exchanges which use an open limit order book. This paper investigates the microstructure of various bitcoin markets with respect to liquidity and private information processing. The markets are found to be fairly liquid, providing liquidity at a stable rate throughout the 24 hours trading period. The spread itself as well as the proportion attributed to adverse selection costs are high suggesting that private information is an important aspect in the bid-ask spread.
Keywords: adverse selection, Bitcoin, liquidity, market microstructure
JEL Classification: C58, E44, F31
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