Bitcoin Price Dynamics: The Stark Contrast Between P2P and Exchange Trading

11 Pages Posted: 3 Jan 2019

See all articles by Jackie Johnson

Jackie Johnson

Johnson Research, Perth

Mark Holub

The University of Western Australia - UWA Business School

Date Written: November 25, 2018

Abstract

With Bitcoin’s price reaching nearly US$20,000 in December 2017, the decision was made to examine, in monetary terms, the Bitcoin market in US dollars, the euro and the UK pound to highlight the fact that peer-to-peer (P2P) traders face a very different market to those trading via a Bitcoin exchange. We find that there are enormous differences in the premiums paid for bitcoins, especially at times of extreme price changes; not only are there massive differences between P2P and exchange trading but premiums also vary across currencies and exchanges. In addition, we are able to calculate the proportion of exchange trades above and below the market, potentially providing a useful tool for developing a low risk trading strategy by identifying exchanges where bitcoins are more frequently purchased below the market price and exchanges where the majority of trades are above the market. Allowing a buy low, sell high strategy to be developed.

Keywords: Bitcoin, P2P, Bitcoin Exchanges, Premiums, Cryptocurrency markets

JEL Classification: G11, G15, F60, F61, F65

Suggested Citation

Johnson, Jackie and Holub, Mark, Bitcoin Price Dynamics: The Stark Contrast Between P2P and Exchange Trading (November 25, 2018). Available at SSRN: https://ssrn.com/abstract=3290326 or http://dx.doi.org/10.2139/ssrn.3290326

Jackie Johnson (Contact Author)

Johnson Research, Perth ( email )

PO Box 440
Bullcreek, WA 6149
Australia

Mark Holub

The University of Western Australia - UWA Business School ( email )

35 Stirling Highway (M250)
Crawley WA 6009
Australia
+61 8 64882647 (Phone)
+61 8 64881047 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
35
Abstract Views
309
PlumX Metrics