Influencers, Inefficiency and Fraud – The Bitcoin Price Discovery Network Under the Microscope

61 Pages Posted: 25 Apr 2022

See all articles by Simon Trimborn

Simon Trimborn

University of Amsterdam - Amsterdam School of Economics (ASE); University of Amsterdam - CeNDEF

Ying Chen

National University of Singapore

Ray-Bing Chen

National Cheng Kung University

Date Written: March 30, 2022

Abstract

We present a TriSNAR modeling framework for understanding the dynamic interactions of multiple markets for Bitcoin trading, including market efficiency, and for identifying influential exchanges in the global trading network. We consider two types of influential exchanges from the perspectives of investors, regulators, and policymakers: exchanges that are market leaders and exchanges potentially used for market manipulation. Among 194 Bitcoin exchanges, we find that exchange Kraken was the leading exchange prior to the market frenzy of 2017. We also find a fraud-related exchange (Bitfinex) where some other exchanges display a similar role in the price discovery network than this exchange, raising questions about whether they may also be used for fraudulent activities. In addition, price discovery shows that the Bitcoin exchange network has been decreasing in efficiency from 2015 to 2017, and it has been increasingly efficient since 2018. We investigate the finite sample and asymptotic properties of TriSNAR. Compared to alternative methods, TriSNAR outperforms in terms of accuracy, runtime, and ability to discover multi-market network structures.

Keywords: Influencer Identification, Market Efficiency, Fraud Detection, Structure Detection, Bitcoin Exchanges

JEL Classification: C01, C55, C58, G14

Suggested Citation

Trimborn, Simon and Chen, Ying and Chen, Ray-Bing, Influencers, Inefficiency and Fraud – The Bitcoin Price Discovery Network Under the Microscope (March 30, 2022). Available at SSRN: https://ssrn.com/abstract=4071212 or http://dx.doi.org/10.2139/ssrn.4071212

Simon Trimborn (Contact Author)

University of Amsterdam - Amsterdam School of Economics (ASE) ( email )

Roetersstraat 11
Amsterdam, North Holland 1018 WB
Netherlands

University of Amsterdam - CeNDEF ( email )

Roetersstraat 11
Amsterdam, NL-1018WB
Netherlands

Ying Chen

National University of Singapore ( email )

Department of Mathematics, Faculty of Science
Block S17, Level 4, 10 Lower Kent Ridge Road
Singapore, Singapore 119076
Singapore

Ray-Bing Chen

National Cheng Kung University

No.1, University Road
Tainan
Taiwan

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
176
Abstract Views
389
rank
247,046
PlumX Metrics