Informed trading in the Bitcoin market

Wenjun Feng, Yiming Wang and Zhengjun Zhang

Finance Research Letters, 2018, vol. 26, issue C, 63-70

Abstract: Bitcoin’s price sensitivity to the material events makes informed trading very profitable in this new market. We propose a novel indicator to assess informed trades ahead of cryptocurrency-related events. Using trade-level data of USD/BTC exchange rates, we find evidence of informed trading in the Bitcoin market prior to large events: Quantiles of the order sizes of buyer-initiated (seller-initiated) orders are abnormally high before large positive (negative) events, compared to the quantiles of seller-initiated (buyer-initiated) orders. When examining the timing of informed trades, we further notice that informed traders prefer to build their positions two days before large positive events and one day before large negative events. The profits of informed trading in the Bitcoin market are estimated to be considerably large.

Keywords: Bitcoin; Cryptocurrency; Informed trading (search for similar items in EconPapers)
JEL-codes: G10 G14 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (66)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1544612317306992
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:26:y:2018:i:c:p:63-70

DOI: 10.1016/j.frl.2017.11.009

Access Statistics for this article

Finance Research Letters is currently edited by R. Gençay

More articles in Finance Research Letters from Elsevier
Bibliographic data for series maintained by Catherine Liu ().