Price Discovery in Cryptocurrency Markets
AbstractWe ask which markets drive bitcoin prices and how price discovery happens across different exchanges. Does the greater exuberance for cryptocurrencies outside the United States affect prices only on local markets or does it impact price formation on global cryptocurrency markets? We document significant heterogeneity in which price formation happens across exchanges and time. When markets are more integrated, shocks to prices on all exchanges contribute to price discovery. However, when markets become segmented, those exchanges that have large arbitrage spreads relative to the US price, i.e. where investors are more exuberant become much less important for price discovery.
CitationMakarov, Igor, and Antoinette Schoar. 2019. "Price Discovery in Cryptocurrency Markets." AEA Papers and Proceedings, 109: 97-99. DOI: 10.1257/pandp.20191020
- E42 Monetary Systems; Standards; Regimes; Government and the Monetary System; Payment Systems
- F31 Foreign Exchange
- G13 Contingent Pricing; Futures Pricing; option pricing
- G15 International Financial Markets