Fragmentation in the Bitcoin Market: Evidence From Multiple Coexisting Order Books
20 Pages Posted: 4 Aug 2020
Date Written: June 2020
We explore the consolidated order book of five major exchanges to investigate how fragmentation affects the Bitcoin market. Using intraday snapshots of the order book data, we find that the Bitcoin market is quite fragmented, wherein the exchange liquidity measure is significantly negative, even for small transactions. Our results suggest that consolidation tools, such as smart order routers, can be effective in reducing the cost of trading, and that further development of the Bitcoin market’s trading and regulation is needed.
Keywords: bitcoin, fragmented market, market micro-structure, smart order router
JEL Classification: C58, G14, G15
Suggested Citation: Suggested Citation