Decentralized Efficiency? Arbitrage in Bitcoin Markets

30 Pages Posted: 3 Dec 2018 Last revised: 31 Mar 2019

See all articles by Sinan Krueckeberg

Sinan Krueckeberg

University of the German Federal Armed Forces - Helmut Schmidt Universit├Ąt; 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 and increasing arbitrage spreads between global Bitcoin markets. Moreover, spreads between markets follow consistent patterns: Minimum and maximum prices per ten-second interval show significant clustering. Arbitrage traders will find increased spreads during the early UTC hours of a day and due to market entries of new exchanges as well as after bitcoin heists & hacks. January 2017 to April 2018 alone have provided 2 million ten-second intervals with average arbitrage spreads above 4% that have remained unexploited. We conclude that Bitcoin market inefficiency increases 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). 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 Universit├Ąt ( 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 )

Adolphsplatz 1
Hamburg, 20457
Germany

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

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