Decentralized Efficiency? Arbitrage in Bitcoin Markets

Sinan Krückeberg and Peter Scholz

Financial Analysts Journal, 2020, vol. 76, issue 3, 135-152

Abstract: Using tick-level bitcoin data from February 2013 through April 2018, we show substantial arbitrage spreads between global bitcoin markets. Spreads follow multiple consistent patterns. Minimum and maximum prices show significant clustering. Spreads increase during the early hours of a day (according to coordinated universal time), when new exchanges enter markets, and following bitcoin heists and hacks. The full year 2017 and the first quarter of 2018 each had exploitable net arbitrage profit opportunities of at least USD380 million that smart money failed to capture. Based on long-term analyses, we also found that bitcoin market inefficiency has increased over time.Disclosure: The authors report no conflicts of interest. Editor’s Note This article was externally reviewed in our double-blind peer-review process. When the article was accepted for publication, the authors thanked the reviewers in their acknowledgments. Daniele Bianchi and Nicola Borri were the reviewers for this article.Submitted 12 September 2019Accepted 18 February 2020 by Stephen J. Brown

Date: 2020
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DOI: 10.1080/0015198X.2020.1733902

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