Are Cryptocurrency Markets Running Behind the Fed? A Significant Shift in Crypto Markets Microstructure

Abstract

In this research we show that 2021 became a year when crypto markets significantly adjusted behavioural patterns, showing an increased institutional influence.
We have come to two key conclusions that might indicate significant changes in the cryptocurrency market microstructure.
Firstly, in contrast to recent research, we note that BTC/USD was sensitive to major Fed policy announcements in Q2-Q3 2021 similar to main asset classes.
Secondly, OTC Liquidity Providers tend to provide twice as narrow spreads in comparison to Centralised Crypto Exchanges during market volatility related to macroeconomic news.

Keywords: Cryptocurrency Markets, High Frequency Trading

JEL Classification: G14