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Does bitcoin liquidity resemble the liquidity of other financial assets?

Author

Listed:
  • Rui Ma

    (La Trobe Business School, La Trobe University, Melbourne, VIC, Australia)

  • Ben R Marshall

    (Massey University, Palmerston North, New Zealand)

  • Nhut H Nguyen

    (Auckland University of Technology, Auckland, New Zealand)

  • Nuttawat Visaltanachoti

    (Massey University, Auckland, New Zealand)

Abstract

Bitcoin is becoming a popular financial asset and means of transacting. However, little is known about an important aspect of the bitcoin market: its liquidity. We consider whether various dimensions of liquidity evident in other asset classes are present in bitcoin spot and futures liquidity. We find variations in spot liquidity across bitcoin exchanges and a strong commonality in bitcoin spot and futures market liquidity. The pricing of spot and futures bitcoin is relatively inefficient, and liquidity plays an important role. Deterioration in liquidity also contributes to bitcoin crash risk and large return declines. JEL Classification: G11, G23

Suggested Citation

  • Rui Ma & Ben R Marshall & Nhut H Nguyen & Nuttawat Visaltanachoti, 2022. "Does bitcoin liquidity resemble the liquidity of other financial assets?," Australian Journal of Management, Australian School of Business, vol. 47(4), pages 729-748, November.
    • Handle: RePEc:sae:ausman:v:47:y:2022:i:4:p:729-748
    DOI: 10.1177/03128962211069615
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    More about this item

    Keywords

    Bitcoin; cryptocurrency; liquidity;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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