Bitcoin Exchange Rates: How Integrated are Markets?

49 Pages Posted: 7 Oct 2018 Last revised: 3 Jul 2019

See all articles by Alexander Brauneis

Alexander Brauneis

University of Klagenfurt

Roland Mestel

University of Graz

Ryan Riordan

Queen's University - Smith School of Business

Erik Theissen

University of Mannheim - Finance Area

Date Written: September 14, 2018

Abstract

We study trading of Bitcoin against US dollar (BTCUSD) on exchanges in three continents, Bitfinex, Bitstamp and Coinbase Pro. We use a high frequency dataset that contains transactions and order book information. The BTCUSD market is highly liquid in terms of bid-ask spreads and order book depth. While spreads are even lower than in equity markets, prices are not integrated across exchanges. Persistent differences exist between the three exchanges in terms of trade prices and posted prices often violating no-arbitrage assumptions. The liquidity of the Bitcoin exchanges is predominantly determined by local factors and is essentially independent of liquidity in equity and FX markets. This suggests that despite the virtual nature of Bitcoin, local jurisdictional factors affect the flow of capital between low and high price jurisdictions.

Keywords: Bitcoin, Cryptocurrencies, Market Integration, Liquidity, Bid-Ask Spread

JEL Classification: G10, G12

Suggested Citation

Brauneis, Alexander and Mestel, Roland and Riordan, Ryan and Theissen, Erik, Bitcoin Exchange Rates: How Integrated are Markets? (September 14, 2018). Available at SSRN: https://ssrn.com/abstract=3249477 or http://dx.doi.org/10.2139/ssrn.3249477

Alexander Brauneis (Contact Author)

University of Klagenfurt ( email )

Universitaetsstrasse 65-67
Klagenfurt, 9020
Austria
+43 463 2700 4022 (Phone)
+43 463 2700 4092 (Fax)

HOME PAGE: http://www.aau.at/fin

Roland Mestel

University of Graz ( email )

Institute of Banking and Finance
Universitaetsstrasse 15/F2
A-8010 Graz
Austria
+43 316 380 7304 (Phone)
+43 316 380 9580 (Fax)

Ryan Riordan

Queen's University - Smith School of Business ( email )

Smith School of Business, Queen's University
143 Union Street
Kingston, Ontario K7L 3N6
Canada

Erik Theissen

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

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