The Intraday Dynamics of Bitcoin

24 Pages Posted: 7 Aug 2017

See all articles by Andrea Eross

Andrea Eross

Heriot-Watt University

Frank McGroarty

University of Southampton - Southampton Business School

Andrew Urquhart

ICMA Centre, Henley Business School

Simon Wolfe

University of Southampton - Southampton Business School

Date Written: August 4, 2017

Abstract

Bitcoin has received much investor attention in recent years, however, there remains a lot of scepticism and lack of understanding of this cryptocurrency. We contribute to the growing literature of Bitcoin by examining the intraday variables of the leading Bitcoin exchange with the highest information share from 1st November 2014 to 31st October 2016 to reveal the intraday stylized facts of Bitcoin and also study the intraday interaction between returns, volume, bid-ask spread and volatility. Employing GMT-stamped tick data aggregated to the 5-mintuely frequency, we find that volume, bid-ask spread and volatility all experience n-shaped patterns throughout the day which suggests that European and North American traders are the main drivers of Bitcoin trading and volatility. It also suggests that volatility and the bid-ask spread are highly related as suggested by Roll (1984), which is probably due to the lack of market makers in Bitcoin markets. We also find that all intraday variables are highly correlated, possess significant lead-lag relationships and there is significant bilateral Granger causality.

Keywords: Bitcoin; Cryptocurrency; Intraday Patterns; Granger causality; Lead-Lag; High-Frequency

JEL Classification: F30; G02; G15

Suggested Citation

Eross, Andrea and McGroarty, Frank and Urquhart, Andrew and Wolfe, Simon, The Intraday Dynamics of Bitcoin (August 4, 2017). Available at SSRN: https://ssrn.com/abstract=3013699 or http://dx.doi.org/10.2139/ssrn.3013699

Andrea Eross

Heriot-Watt University ( email )

Mary Burton Building
School of Social Sciences
Edinburgh, Midlothian EH14 4AS
United Kingdom

Frank McGroarty

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

Andrew Urquhart

ICMA Centre, Henley Business School ( email )

University of Reading
Whiteknights
Reading, Berkshire RG6 6BA
United Kingdom

Simon Wolfe (Contact Author)

University of Southampton - Southampton Business School ( email )

Southampton, SO17 1BJ
United Kingdom

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