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The Information Content of Delayed Block Trades in Decentralised Markets

Author

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  • Galati, Luca
  • De Blasis, Riccardo

Abstract

This paper examines the market impact of large blocks in decentralised crypto markets. We examine this issue using a natural experiment in Bitcoin provided by the Gemini exchange, which introduced a block trading facility but changed, in December 2019, the ability of market participants to trade a block and report it with a delay in smaller-sized trades. Consistent with theoretical predictions and earlier empirical findings, we largely confirm that the information content of large trades is significantly lower in the upstairs market than in the downstairs. In contrast with prior research in traditional markets, we find that delaying the reporting of a block traded away from the continuous book discourages informed trading and potentially decreases the informativeness of trading and, therefore, information efficiency. Further, we find that the newly implemented size requirement for upstairs trades increases the total market impact, thereby not working as the intended introduction of a block trading facility.

Suggested Citation

  • Galati, Luca & De Blasis, Riccardo, 2024. "The Information Content of Delayed Block Trades in Decentralised Markets," Economics & Statistics Discussion Papers esdp24094, University of Molise, Department of Economics.
    • Handle: RePEc:mol:ecsdps:esdp24094
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    More about this item

    Keywords

    block trading; decentralised markets; information efficiency; informed trading; market microstructure; price impact;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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