Price Discovery on Bitcoin Markets

25 Pages Posted: 16 Nov 2018 Last revised: 16 Dec 2018

See all articles by Paolo Pagnottoni

Paolo Pagnottoni

University of Pavia - Department of Economics and Management

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics

Date Written: November 7, 2018

Abstract

Trading of Bitcoin is spread about multiple venues where buying and selling is offered in various currencies. However, all exchanges trade one common good and by the law of one price, the different prices should not deviate in the long run. In this context we are interested in which platform is the most important one in terms of price discovery. To this end, we use a pairwise approach accounting for a potential impact of exchange rates. The contribution to price discovery is measured by Hasbrouck's and Gonzalo and Granger's information share. We then derive an ordering with respect to the importance of each market which reveals that the Chinese OKCoin platform is the leader in price discovery of Bitcoin, followed by BTC China.

Keywords: price discovery, bitcoin, hasbrouck information shares

JEL Classification: C58, C32, G23

Suggested Citation

Pagnottoni, Paolo and Dimpfl, Thomas, Price Discovery on Bitcoin Markets (November 7, 2018). Available at SSRN: https://ssrn.com/abstract=3280261 or http://dx.doi.org/10.2139/ssrn.3280261

Paolo Pagnottoni (Contact Author)

University of Pavia - Department of Economics and Management

Via San Felice 7
Pavia, 27100
Italy

Thomas Dimpfl

University of Tuebingen - Department of Statistics and Econometrics ( email )

Germany

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