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How investible is Bitcoin? Analyzing the liquidity and transaction costs of Bitcoin markets

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  • Dyhrberg, Anne H.
  • Foley, Sean
  • Svec, Jiri

Abstract

We examine the investibility of Bitcoin by exploring the trading dynamics and market microstructure of Bitcoin on three US cryptocurrency exchanges using high frequency intraday data of individual trades and quotes. Although all exchanges offer continuous trading, we find that the highest trading activity, highest volatility and lowest spreads coincide with US market trading hours, suggesting that most trades are non-algorithmic and executed by retail investors. We further find that average quoted and effective spreads for Bitcoin are lower than spreads on major equity exchanges, implying that Bitcoin is highly investible for retail size transactions.

Suggested Citation

  • Dyhrberg, Anne H. & Foley, Sean & Svec, Jiri, 2018. "How investible is Bitcoin? Analyzing the liquidity and transaction costs of Bitcoin markets," Economics Letters, Elsevier, vol. 171(C), pages 140-143.
    • Handle: RePEc:eee:ecolet:v:171:y:2018:i:c:p:140-143
    DOI: 10.1016/j.econlet.2018.07.032
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    More about this item

    Keywords

    Bitcoin; Cryptocurrency; Market microstructure; Intraday patterns;
    All these keywords.

    JEL classification:

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

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