Efficiency of The Cryptocurrency Markets

This paper analyzes the efficiency of the cryptocurrency market. The main goal of the work was to find out whether there is an arbitrage on such market or not. In the academic environment, this topic is relevant, since it has not yet been sufficiently studied and requires additional research. The main hypothesis of this work is that the cryptocurrency market is far from efficient. Accordingly, there could exist some arbitrage opportunities. The largest and most liquid exchanges were selected to investigate this issue: 1) OkCoin, 2) Binance, 3) Bitstamp, 4) Bitfinex, 5) Kraken, 6) Bittrex, 7) Huobi Global, 8) OkEx, 9) Cex io, 10) Coinbase, as well as the most significant currency pairs: BTC / USD, ETH / USD, BCH / USD, LTC / USD, XRP / USD. The study revealed that cryptocurrency prices do not follow the random walk process and found predictability based on historical data. It follows that there are theoretical prerequisites for the existence of arbitrage, but further analysis has shown that a certain part of such opportunities are offset by the costs of various exchanges. Thus, it can be argued that the cryptocurrency market is closer to efficient than it is supposed to be, since, despite the theoretical predictability of prices, some of the potential arbitrage opportunities are well explained by the costs incurred by operations on cryptocurrency exchanges. However, there is another part that cannot be explained, so additional analysis and a more accurate assessment of the cost structure is required.