Finance Research Seminar - Igor MAKAROV
Igor MAKAROV, London School of Economics
Friday 20 April 2018 (10h30 - 12h00) - Extranef - 126
"Trading and Arbitrage in Cryptocurrency Markets"
This paper documents the trading dynamics and efficiency of bitcoin and other cryptocurrency markets. First, there are large arbitrage opportunities in bitcoin prices relative to fiat currencies across exchanges that often persist for several days or weeks. These price dispersions exist even in the face of significant trading volumes on many of the exchanges. The total size of arbitrage profits from December 2017 to February 2018 is about $1 billion. Second, we show that arbitrage opportunities are much larger across regions than within the same region; they are particularly large between the US, Japan and Korea, but smaller between the US and Europe. Third, these same price dispersions do not exist between cryptocurrencies. The average difference in the price of bitcoin to ethereum (or ripple) across exchanges is below 3% over the same time period. Finally, we document that net orderflow affects bitcoin returns and the size of the arbitrage spreads between exchanges. Our analysis sheds light on the nature of the barriers to arbitrage in cryptocurrency markets.
HEC Department of Finance