An Inside Look into Cryptocurrency Exchanges

54 Pages Posted: 8 Jan 2021

See all articles by Qing Chan

Qing Chan

The University of Hong Kong

Wenzhi Ding

The University of Hong Kong - Faculty of Business and Economics

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Alberto G. Rossi

Georgetown University

Date Written: December 9, 2020

Abstract

Using unique data from a medium-sized cryptocurrency exchange in Asia, we establish 10 facts about cryptocurrency exchanges and cryptocurrency trading. 1) Individuals hold cryptocurrency portfolios of small value, 2) they trade very few cryptocurrencies, 3) their trading patterns are very concentrated, and 4) their trading horizon is very short. 5) Cryptocurrency characteristics explain how much they are traded and how long they are held in investors' portfolios. 6) Most of the trades occur between individual investors and institutional investors and market makers play a minor role in the exchange. 7) It is difficult to benchmark portfolio returns because investors' portfolios are not diversified enough, but 8) institutional investors do not outperform individual investors. 9) Individual investors' make good trading decisions, in the sense that the cryptocurrencies they buy outperform the ones they sell. 10) The same is not true for institutional investors.

Keywords: FinTech, Cryptocurrencies, Crypto Exchange, Individual Investors

Suggested Citation

Chan, Qing and Ding, Wenzhi and Lin, Chen and Rossi, Alberto G., An Inside Look into Cryptocurrency Exchanges (December 9, 2020). Available at SSRN: https://ssrn.com/abstract=3759062 or http://dx.doi.org/10.2139/ssrn.3759062

Qing Chan

The University of Hong Kong

Pokfulam Road
Hong Kong, Pokfulam HK
China

Wenzhi Ding

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong SAR
China

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Alberto G. Rossi (Contact Author)

Georgetown University ( email )

McDonough School of Business
Georgetown University
Washington, DC 20057
United States

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