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Price discovery through wrapped tokens

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  • Johnson, William C.
  • Scharnowski, Stefan

Abstract

We examine how wrapped tokens – tokenized representations of assets on other blockchains – contribute to cryptocurrency price discovery. Based on high-frequency data for Wrapped Bitcoin (wBTC), our results indicate that wBTC accounts for about 10% of the total price discovery of Bitcoin as measured by information shares. We show that wBTC’s contribution to price discovery is positively related to wBTC liquidity and trading volume as well as to important measures of decentralized finance activity. Our results have significant implications for the relationships between crypto-assets on different platforms as well as for systemic risk in the crypto-ecosystem.

Suggested Citation

  • Johnson, William C. & Scharnowski, Stefan, 2025. "Price discovery through wrapped tokens," Economics Letters, Elsevier, vol. 257(C).
    • Handle: RePEc:eee:ecolet:v:257:y:2025:i:c:s0165176525005403
    DOI: 10.1016/j.econlet.2025.112703
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    References listed on IDEAS

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    Cited by:

    1. Castillo León, Jaime & Lehar, Alfred, 2026. "What data have told us about decentralized finance," Journal of Corporate Finance, Elsevier, vol. 96(C).

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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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