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Price Discovery in Cryptocurrency Markets

Author

Listed:
  • Igor Makarov
  • Antoinette Schoar

Abstract

We ask which markets drive bitcoin prices and how price discovery happens across different exchanges. Does the greater exuberance for cryptocurrencies outside the United States affect prices only on local markets or does it impact price formation on global cryptocurrency markets? We document significant heterogeneity in which price formation happens across exchanges and time. When markets are more integrated, shocks to prices on all exchanges contribute to price discovery. However, when markets become segmented, those exchanges that have large arbitrage spreads relative to the US price, i.e. where investors are more exuberant become much less important for price discovery.

Suggested Citation

  • Igor Makarov & Antoinette Schoar, 2019. "Price Discovery in Cryptocurrency Markets," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 97-99, May.
    • Handle: RePEc:aea:apandp:v:109:y:2019:p:97-99
    Note: DOI: 10.1257/pandp.20191020
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    File URL: https://www.aeaweb.org/doi/10.1257/pandp.20191020
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    Citations

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    Cited by:

    1. Ao Shu & Feiyang Cheng & Jianlei Han & Zini Liang & Zheyao Pan, 2023. "Arbitrage across different Bitcoin exchange venues: Perspectives from investor base and market related events," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(5), pages 5183-5210, December.
    2. Anil Donmez & Alexander Karaivanov, 2022. "Transaction fee economics in the Ethereum blockchain," Economic Inquiry, Western Economic Association International, vol. 60(1), pages 265-292, January.
    3. Rahman, Md Mustafizur & Oni, Abayomi Olufemi & Gemechu, Eskinder & Kumar, Amit, 2021. "The development of techno-economic models for the assessment of utility-scale electro-chemical battery storage systems," Applied Energy, Elsevier, vol. 283(C).
    4. Harris, Richard D.F. & Mazibas, Murat & Rambaccussing, Dooruj, 2024. "Bitcoin replication using machine learning," International Review of Financial Analysis, Elsevier, vol. 93(C).
    5. Lyons, Richard K. & Viswanath-Natraj, Ganesh, 2023. "What keeps stablecoins stable?," Journal of International Money and Finance, Elsevier, vol. 131(C).
    6. Angerer, Martin & Hoffmann, Christian Hugo & Neitzert, Florian & Kraus, Sascha, 2021. "Objective and subjective risks of investing into cryptocurrencies," Finance Research Letters, Elsevier, vol. 40(C).
    7. Nimesh, Vikas & Sharma, Debojit & Reddy, V. Mahendra & Goswami, Arkopal Kishore, 2020. "Implication viability assessment of shift to electric vehicles for present power generation scenario of India," Energy, Elsevier, vol. 195(C).
    8. Seo, Myung Hwan & Koo, Bonsoo & Yang, Yangzhuoran Fin, 2024. "Nonlinear dynamics of Kimchi premium," Economic Modelling, Elsevier, vol. 135(C).
    9. Yuanyuan (Catherine) Chen, 2021. "Empirical analysis of bitcoin price," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 45(4), pages 692-715, October.
    10. Borri, Nicola & Shakhnov, Kirill, 2023. "Cryptomarket discounts," Journal of International Money and Finance, Elsevier, vol. 139(C).
    11. Richard K. Lyons & Ganesh Viswanath-Natraj, 2020. "What Keeps Stablecoins Stable?," NBER Working Papers 27136, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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