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Exploring sources of statistical arbitrage opportunities among Bitcoin exchanges

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  • Kristoufek, Ladislav
  • Bouri, Elie

Abstract

We investigate potential sources of emerging statistical arbitrage opportunities in the Bitcoin market across five exchanges – Binance, Bitfinex, Bitstamp, Coinbase, and Kraken – via the instrumental variables approach to control for apparent endogeneity. We show that arbitrage opportunities arise when the network is congested and Bitcoin prices are volatile. Increased exchanges volume and on-chain activity increase the correlation between exchanges and thus reduce the arbitrage opportunities. These outcomes are intuitive and economically valid which supports the notion that Bitcoin market is highly volatile and risky but its behavior follows standard economic and financial intuition.

Suggested Citation

  • Kristoufek, Ladislav & Bouri, Elie, 2023. "Exploring sources of statistical arbitrage opportunities among Bitcoin exchanges," Finance Research Letters, Elsevier, vol. 51(C).
    • Handle: RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005116
    DOI: 10.1016/j.frl.2022.103332
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    References listed on IDEAS

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    More about this item

    Keywords

    Cryptocurrencies; Cryptoassets; Bitcoin; Arbitrage; Exchanges;
    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
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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