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Fragmentation in the Bitcoin market: Evidence from multiple coexisting order books

Author

Listed:
  • Jeon, Yoontae
  • Samarbakhsh, Laleh
  • Hewitt, Kenji

Abstract

We explore the consolidated order book of five major exchanges to investigate how fragmentation affects the Bitcoin market. Using intraday snapshots of the order book data, we find that the Bitcoin market is quite fragmented, wherein the exchange liquidity measure is significantly negative, even for small transactions. Our results suggest that consolidation tools, such as smart order routers, can be effective in reducing the cost of trading, and that further development of the Bitcoin marketâs trading and regulation is needed.

Suggested Citation

  • Jeon, Yoontae & Samarbakhsh, Laleh & Hewitt, Kenji, 2021. "Fragmentation in the Bitcoin market: Evidence from multiple coexisting order books," Finance Research Letters, Elsevier, vol. 39(C).
    • Handle: RePEc:eee:finlet:v:39:y:2021:i:c:s1544612320301136
    DOI: 10.1016/j.frl.2020.101654
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    References listed on IDEAS

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    Cited by:

    1. Kubo, Kenji & Nakagawa, Kei & Mizukami, Daiki & Acharya, Dipesh, 2023. "Optimal liquidation strategy for cryptocurrency marketplaces using stochastic control," Finance Research Letters, Elsevier, vol. 53(C).

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    More about this item

    Keywords

    Bitcoin; Fragmented market; Market microstructure; Smart order router;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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