Understanding Bitcoin liquidity

Stefan Scharnowski

Finance Research Letters, 2021, vol. 38, issue C

Abstract: This paper analyzes the evolution of Bitcoin liquidity and its determinants. Using a new methodology to identify the most liquid exchange at each point in time, I find that driving factors behind the overall increases in liquidity and trading activity come mostly from within the Bitcoin network. While the state of the US economy only weakly influences Bitcoin liquidity, there is some evidence that gold and Bitcoin are perceived as complements. Moreover, patterns in market making and trading are consistent with the activity of both institutional and retail traders.

Keywords: Cryptocurrency; Bitcoin; Liquidity; Market microstructure (search for similar items in EconPapers)
JEL-codes: G10 G12 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319311286

DOI: 10.1016/j.frl.2020.101477

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