Exploring sources of statistical arbitrage opportunities among Bitcoin exchanges

Ladislav Krištoufek () and Elie Bouri

Finance Research Letters, 2023, vol. 51, issue C

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.

Keywords: Cryptocurrencies; Cryptoassets; Bitcoin; Arbitrage; Exchanges (search for similar items in EconPapers)
JEL-codes: G14 G15 G23 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:51:y:2023:i:c:s1544612322005116

DOI: 10.1016/j.frl.2022.103332

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