Price Discovery on Bitcoin Markets
25 Pages Posted: 16 Nov 2018 Last revised: 16 Dec 2018
Date Written: November 7, 2018
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: Suggested Citation