Decentralized Efficiency? Arbitrage in Bitcoin Markets

Financial Analysts Journal, 76:3, 135-152, DOI: 10.1080/0015198X.2020.1733902

32 Pages Posted: 3 Dec 2018 Last revised: 16 Jul 2020

See all articles by Sinan Krueckeberg

Sinan Krueckeberg

University of the German Federal Armed Forces - Helmut Schmidt Universität; HSBA Hamburg School of Business Administration

Peter Scholz

Hamburg School of Business Administration

Date Written: March 29, 2018

Abstract

Using tick-level bitcoin data from February 2013 to April 2018, we show significant arbitrage spreads between global bitcoin markets. Spreads follow multiple consistent patterns. Minimum and maximum prices show significant clustering. Spreads increase during the early hours of a day (according to universal coordinated time), new exchange market entries, and bitcoin heists and hacks. The full year 2017 and the first quarter of 2018 alone each had exploitable net arbitrage profit opportunity of at least US$380 million that smart money failed to capture. Based on long-term analyses, we also found that bitcoin market inefficiency has increased over time.

Keywords: Bitcoin, Cryptocurrency, Efficiency, Arbitrage, Patterns

JEL Classification: D40, G14

Suggested Citation

Krueckeberg, Sinan and Scholz, Peter, Decentralized Efficiency? Arbitrage in Bitcoin Markets (March 29, 2018). Financial Analysts Journal, 76:3, 135-152, DOI: 10.1080/0015198X.2020.1733902, Available at SSRN: https://ssrn.com/abstract=3292127 or http://dx.doi.org/10.2139/ssrn.3292127

Sinan Krueckeberg (Contact Author)

University of the German Federal Armed Forces - Helmut Schmidt Universität ( email )

Hamburg
Germany

HOME PAGE: http://www.krueckeberg.us

HSBA Hamburg School of Business Administration ( email )

Germany

Peter Scholz

Hamburg School of Business Administration ( email )

Willy-Brandt-Str. 75
Hamburg, 20459
Germany
+4917684421336 (Phone)

HOME PAGE: http://think-finance.de

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