Bitcoin arbitrage

Andrei Shynkevich

Finance Research Letters, 2021, vol. 40, issue C

Abstract: We investigate arbitrage at four decentralized bitcoin exchanges that contribute to calculation of the index serving as the underlying price for the CME bitcoin futures. Deviations from price parity are much higher on average, more volatile, exhibit persistency and occasionally reach fairly large extremes during the 2016–2017 period, becoming economically small, much less volatile and sporadic afterwards. We design an arbitrage investment strategy based on the premise of convergence to parity and account for transaction costs. Profitable arbitrage opportunities have become sparse and scarce since 2018.

Keywords: Bitcoin; Spot market; Price deviation; Arbitrage (search for similar items in EconPapers)
JEL-codes: C12 C55 G10 G14 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320308886

DOI: 10.1016/j.frl.2020.101698

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