Does bitcoin liquidity resemble the liquidity of other financial assets?

Rui Ma, Ben R Marshall, Nhut H Nguyen and Nuttawat Visaltanachoti
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Rui Ma: La Trobe Business School, La Trobe University, Melbourne, VIC, Australia
Ben R Marshall: Massey University, Palmerston North, New Zealand
Nhut H Nguyen: Auckland University of Technology, Auckland, New Zealand
Nuttawat Visaltanachoti: Massey University, Auckland, New Zealand

Australian Journal of Management, 2022, vol. 47, issue 4, 729-748

Abstract: Bitcoin is becoming a popular financial asset and means of transacting. However, little is known about an important aspect of the bitcoin market: its liquidity. We consider whether various dimensions of liquidity evident in other asset classes are present in bitcoin spot and futures liquidity. We find variations in spot liquidity across bitcoin exchanges and a strong commonality in bitcoin spot and futures market liquidity. The pricing of spot and futures bitcoin is relatively inefficient, and liquidity plays an important role. Deterioration in liquidity also contributes to bitcoin crash risk and large return declines. JEL Classification: G11, G23

Keywords: Bitcoin; cryptocurrency; liquidity (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:sae:ausman:v:47:y:2022:i:4:p:729-748

DOI: 10.1177/03128962211069615

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