Bitcoin unchained: Determinants of cryptocurrency exchange liquidity

Alexander Brauneis, Roland Mestel, Ryan Riordan and Erik Theissen

Journal of Empirical Finance, 2022, vol. 69, issue C, 106-122

Abstract: We study bitcoin to US dollar (BTCUSD) liquidity and liquidity determinants using order book data from three large cryptocurrency exchanges. The BTCUSD market is more liquid than US equity markets with bid–ask spreads often below 1 basis point. We find that BTCUSD liquidity is largely explained by same-exchange past liquidity, past cryptocurrency market-wide liquidity and volatility, and fees charged on the blockchain for bitcoin transfers. Surprisingly, we find that BTCUSD liquidity is unrelated to broader financial markets and financial market liquidity.

Keywords: Cryptocurrencies; Liquidity; Bid–ask spread; Determinants (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:69:y:2022:i:c:p:106-122

DOI: 10.1016/j.jempfin.2022.08.004

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