Bitcoin arbitrage

Shynkevich, Andrei

doi:10.1016/j.frl.2020.101698

Cited by 12 publications

(11 citation statements)

References 11 publications

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“…In the Bitcoin setup, there seem to be opportunities for arbitrage gains, in particular at the beginning of the sample period, when the correlation was sometimes very low. This finding is in line with Shynkevich (2020) who reports that arbitrage gains are more difficult to realize since 2018. This is the period when the correlation tends toward one in Fig.…”

Section: Market Correlationssupporting

confidence: 90%

The volatility of Bitcoin and its role as a medium of exchange and a store of value

2021

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Bitcoin is designed as a peer-to-peer cash system. To work as a currency, it must be stable or be backed by a government. In this paper, we show that the volatility of Bitcoin prices is extreme and almost 10 times higher than the volatility of major exchange rates (US dollar against the euro and the yen). The excess volatility even adversely affects its potential role in portfolios. Our analysis implies that Bitcoin cannot function as a medium of exchange and has only limited use as a risk-diversifier. In contrast, we use the deflationary design of Bitcoin as a theoretical basis and demonstrate that Bitcoin displays store of value characteristics over long horizons.

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Section: Market Correlationssupporting

confidence: 90%

The volatility of Bitcoin and its role as a medium of exchange and a store of value

2021

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“…In fact, in the online appendix we present an exercise where we use our strategy in more recent data, and results indicate that the buy-and-hold strategy yields a higher gross return. These results are consistent with the empirical evidence of Crépelière and Zeisberger (2020) and Shynkevich (2020).…”

Section: Notessupporting

confidence: 91%

“…These findings of arbitrage opportunities are in line with Shynkevich (2020), who finds arbitrage opportunities in a period prior to 2018 using hourly data from 4 exchanges.…”

Section: A Trading Strategy Based On Price Discoverysupporting

confidence: 89%

“…The pair (LB, FB) using the closing price as reference is the only case where ILS indicates that a less liquid market leads the price discovery, and also is the only case in which the leadership arbitrage fails to beat the buy-and-hold strategy. These findings of arbitrage opportunities are in line with Shynkevich (2020), who finds arbitrage opportunities in a period prior to 2018 using hourly data from 4 exchanges [7].…”

Section: A Trading Strategy Based On Price Discoverysupporting

confidence: 86%

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Price dynamics of cryptocurrencies in parallel markets: evidence from Bitcoin exchanges in Brazil

Andrade¹,

Barros²,

Motoki

et al. 2021

SEF

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Purpose This paper aims to study the dynamics of bitcoin prices in Brazil, a large emerging economy with an unregulated bitcoin market. Design/methodology/approach First, this study tests if the Law of One Price (LOOP) is valid for bitcoin prices in Brazil, conducting tests with data from three Brazilian exchanges. Next, this study documents bitcoin price dynamics in the short run by studying the price discovery mechanism in these exchanges. This study uses Information Share and Component Share, combining the two measures to obtain an Information Leadership Share (ILS) measure. Findings This study finds a common trend within bitcoin prices among a set of exchanges, with cointegration tests between the price series indicating that LOOP is valid in Brazilian markets in the long run. ILS indicated that, for closing prices, the most liquid exchange (Foxbit) leads discovery, whereas the least liquid (Local Bitcoin) lags, with Mercado Bitcoin in the middle both in terms of discovery and liquidity. Finally, this study provides evidence that the price variation in the market that leads price discovery can be used to construct an arbitrage in another exchange. Originality/value This research brings the first evidence of a price discovery mechanism for exchanges in Brazilian Reais. Although LOOP is valid in the long run, price leadership in bitcoin markets potentially create arbitrage opportunities in the short run. This study contributes to the growing literature of bitcoin prices with novel evidence from a large emerging economy.

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“…Moreover, the authors highlighted that the price differences are much larger for exchanges across ountries than within the same country, and smaller between crypto-currencies. Comparatively, a recent study [17] addressed the arbitrage opportunities on trading bitcoin at four crypto-exchanges. It was determined that deviations from price parity are much higher on average, more volatile, exhibit persistency, and occasionally achieve substantially large extremes during the 2016-2017 period.…”

Section: Introductionmentioning

confidence: 99%

Key Roles of Crypto-Exchanges in Generating Arbitrage Opportunities

Kabašinskas

Šutienė

2021

Entropy

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The evolving crypto-currency market is seen as dynamic, segmented, and inefficient, coupled with a lack of regulatory oversight, which together becomes conducive to observing the arbitrage. In this context, a crypto-network is designed using bid/ask data among 20 crypto-exchanges over a 2-year period. The graph theory technique is employed to describe the network and, more importantly, to determine the key roles of crypto-exchanges in generating arbitrage opportunities by estimating relevant network centrality measures. Based on the proposed arbitrage ratio, Gatecoin, Coinfloor, and Bitsane are estimated as the best exchanges to initiate arbitrage, while EXMO and DSX are the best places to close it. Furthermore, by means of canonical correlation analysis, we revealed that higher volatility and the decreasing price of dominating crypto-currencies and CRIX index signal bring about a more likely arbitrage appearance in the market. The findings of research include pre-tax and after-tax arbitrage opportunities.

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Bitcoin arbitrage

Cited by 12 publications

References 11 publications

The volatility of Bitcoin and its role as a medium of exchange and a store of value

The volatility of Bitcoin and its role as a medium of exchange and a store of value

Price dynamics of cryptocurrencies in parallel markets: evidence from Bitcoin exchanges in Brazil

Key Roles of Crypto-Exchanges in Generating Arbitrage Opportunities

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