Bitcoin Liquidity

41 Pages Posted: 27 Jun 2018

See all articles by Ben R. Marshall

Ben R. Marshall

Massey University - School of Economics and Finance

Nhut H. Nguyen

Massey University

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance

Date Written: June 12, 2018

Abstract

Bitcoin is emerging as a popular financial asset and means of transacting. However, little is known about its liquidity. This paper addresses this deficit. We find there is both substantial variation in the level of liquidity across different exchanges and currency pairs and a strong systematic aspect to bitcoin liquidity. Moreover, changes in currency liquidity influence bitcoin liquidity. The pricing of bitcoin is less efficient than stock pricing and liquidity plays an important role, with the inefficient pricing being more prevalent on days with less liquidity. Liquidity declines also contribute to bitcoin crash risk.

Keywords: Bitcoin, Liquidity, Cryptocurrency

JEL Classification: G11, G23

Suggested Citation

Marshall, Ben R. and Nguyen, Nhut Hoang and Visaltanachoti, Nuttawat, Bitcoin Liquidity (June 12, 2018). Available at SSRN: https://ssrn.com/abstract=3194869 or http://dx.doi.org/10.2139/ssrn.3194869

Ben R. Marshall (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand
64 6 350 5799 (Phone)
64 6 350 5651 (Fax)

Nhut Hoang Nguyen

Massey University ( email )

New Zealand

Nuttawat Visaltanachoti

Massey University - Department of Economics and Finance ( email )

School of Economics and Finance
Private Bag 102904, NSMC
Auckland
New Zealand
64 9 414 0800 (43169) (Phone)
64 9 441 8177 (Fax)

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