Arbitrage in the Market for Cryptocurrencies
Journal of Financial Markets, Forthcoming
TAF-Working Paper Series No. 67 / May 2022
52 Pages Posted: 19 Jun 2020 Last revised: 13 Dec 2022
Date Written: December 12, 2022
Arbitrage opportunities in markets for cryptocurrencies are well-documented. In this paper, we confirm that they existed; however, their magnitude decreased greatly from April 2018 onward. Analyzing various trading strategies, we show that it is hardly possible to exploit existing price differences since then. We discuss and test several mechanisms that may be responsible for the increased market efficiency and find that, particularly, informed trading is correlated with a reduction in arbitrage opportunities.
Keywords: FinTech, arbirtrage, cryptocurrencies, Bitcoin
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