Order Flow and the Bitcoin Spot Rate

K. H. McIntyre and Kristine Harjes

Applied Economics and Finance, 2016, vol. 3, issue 3, 136-147

Abstract: Bitcoin is a decentralized, open-source cryptocurrency used to make private, peer-to-peer transactions anywhere across the world. Although the individuals involved are (mostly) anonymous, every Bitcoin transaction is a matter of public record; anyone can view every Bitcoin transaction ever made. Following the methodology developed by Evans and Lyons (2002), this paper adapts and estimates a FX microstructure model that emphases order flow, the difference between buyer- and seller-initiated trading volume, to the Bitcoin market Using a data set consisting of all major currency transactions occurring on the Mt. Gox exchange, our results are quite similar to prior microfinance research on traditional currencies insofar order flow is a significant determinant of Bitcoin spot rates.

Keywords: Bitcoin; order flow; asset pricing; FX microstructure; cryptocurrency (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (1)

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