Humboldt-Universität zu Berlin - High Dimensional Nonstationary Time Series

IRTG1792DP2018 014

Price Discovery on Bitcoin Markets

Paolo Pagnottoni
Dirk G. Baur
Thomas Dimpfl

Trading of Bitcoin is spread about multiple venues where buying and selling is offered
in various currencies. However, all markets trade one common good and by the law of
one price, the different prices should not deviate in the long run. In this context we are
interested in which platform is the most important one in terms of price discovery. To this
end, we use a pairwise approach accounting for a potential impact of exchange rates. The
contribution to price discovery is measured by Hasbrouck's and Gonzalo and Granger's
information share. We then derive an ordering with respect to the importance of each
market which reveals that the Chinese OKCoin platform is the leader in price discovery
of Bitcoin, followed by BTC China.

price discovery; Bitcoin; Hasbrouck information shares;

JEL classification:
C58, C32, G23