What drives the liquidity of cryptocurrencies? A long-term analysis

Alexander Brauneis, Roland Mestel () and Erik Theissen

Finance Research Letters, 2021, vol. 39, issue C

Abstract: We analyze the liquidity of four cryptocurrencies on four large trading venues over a four-year period. We estimate the Abdi-Ranaldo spread estimator from hourly transactions data and compare liquidity across cryptocurrencies and exchanges. In order to identify the drivers of cryptocurrency liquidity we analyze a broad set of explanatory variables from general financial markets, global cryptocurrency markets as well as variables specific to each exchange-currency pair. Volatility of cryptocurrency returns, the dollar trading volume and the number of transactions are the most important determinants of liquidity while general financial market variables have no explanatory power.

Keywords: Cryptocurrencies; Liquidity; Bid-ask spread; Spread estimators; Determinants of liquidity (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:39:y:2021:i:c:s154461231931400x

DOI: 10.1016/j.frl.2020.101537

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