Trading and Arbitrage on Cryptocurrency Markets

As for the digital asset, the spot trading market for bitcoin should be one of the world's most orderly and efficient. After all, bitcoin is a globally fungible asset with close to zero storage and transportation costs; in a vacuum, one could expect arbitrage traders to capitalize immediately on any differences in bitcoin prices among various trading venues, subject only to constraints on exchange and market level (trading fees, withdrawal fees, withdrawal time, etc.). Nonetheless, public perception holds almost the opposite opinion, claiming that the bitcoin trading system is inherently chaotic and inefficient, with highly variable prices between exchanges and odd patterns of volume. This is also supported by academic literature related to the topic. This study will demonstrate that this perception is incorrect and based on inaccurate data and false assumptions. By using a data-driven approach, this study will demonstrate that the current bitcoin spot market is much smaller and much more efficient than it is commonly believed. It will demonstrate that effective arbitrage holds prices in lockstep on trading venues around the world, removing significant price fluctuations in a matter of seconds. It will also demonstrate that a number of improvements have positively influenced the bitcoin market since the beginning of 2018, and that today's bitcoin market has little association with the past's one.