The Information Content of Delayed Block Trades in Decentralised Markets

Luca Galati and Riccardo De Blasis ()

Economics & Statistics Discussion Papers from University of Molise, Department of Economics

Abstract: This paper examines the market impact of large blocks in decentralised crypto markets. We examine this issue using a natural experiment in Bitcoin provided by the Gemini exchange, which introduced a block trading facility but changed, in December 2019, the ability of market participants to trade a block and report it with a delay in smaller-sized trades. Consistent with theoretical predictions and earlier empirical findings, we largely confirm that the information content of large trades is significantly lower in the upstairs market than in the downstairs. In contrast with prior research in traditional markets, we find that delaying the reporting of a block traded away from the continuous book discourages informed trading and potentially decreases the informativeness of trading and, therefore, information efficiency. Further, we find that the newly implemented size requirement for upstairs trades increases the total market impact, thereby not working as the intended introduction of a block trading facility.

Keywords: block trading; decentralised markets; information efficiency; informed trading; market microstructure; price impact (search for similar items in EconPapers)
JEL-codes: C58 D47 D82 G14 G18 (search for similar items in EconPapers)
Pages: 40
Date: 2024-03-25
New Economics Papers: this item is included in nep-mst and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:mol:ecsdps:esdp24094

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