Loaded for bear: Bitcoin private wallets, exchange reserves and prices

Lai T. Hoang and Dirk G. Baur

Journal of Banking & Finance, 2022, vol. 144, issue C

Abstract: This study highlights a special feature of cryptocurrency trading and offers information about investor behavior that cannot be observed in traditional financial markets. We find that investors prefer holding bitcoin off exchanges in private wallets and primarily use exchanges to trade. Consequently, bitcoin exchange reserve changes resulting from the movement of bitcoin between private wallets and exchange accounts are negatively related to contemporaneous and future bitcoin returns. Specifically, the transfer of bitcoin on exchanges implies increased selling pressure and the transfer off exchanges implies decreased selling pressure. In turn, flows onto exchanges are triggered by large negative shocks and increased volatility.

Keywords: Blockchain; Bitcoin; Exchange reserves; Price pressure; On-chain transactions; Off-chain transactions (search for similar items in EconPapers)
JEL-codes: E42 F31 G12 G17 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:144:y:2022:i:c:s0378426622002023

DOI: 10.1016/j.jbankfin.2022.106622

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