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Arbitrageurs in the Bitcoin ecosystem : evidence from user-level trading patterns in the Mt. Gox exchange platform
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Saggese, Pietro, Belmonte, Alessandro, Dimitri, Nicola, Facchini, Angelo and Böhme, Rainer (2023) Arbitrageurs in the Bitcoin ecosystem : evidence from user-level trading patterns in the Mt. Gox exchange platform. Journal of Economic Behavior & Organization, 213 . pp. 251-270. doi:10.1016/j.jebo.2023.07.025 ISSN 0167-2681.
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Official URL: http://doi.org/10.1016/j.jebo.2023.07.025
Abstract
We mine the leaked history of trades on Mt. Gox, the dominant Bitcoin exchange from 2011 to early 2014, in order to detect the triangular arbitrage conducted on the platform. To this end, we exploit user identifiers per trade to identify and describe the individual trading patterns of 440 arbitrageurs. Moreover, we introduce proxies for expertise and document that the expert users' distribution of profits first-order stochastically dominates that of non-expert users. Most importantly, by including user fixed effects, we show that expert users make profits on arbitrage by reacting quickly to plausible exogenous variations on the official exchange rates. A small number of expert arbitrageurs are able to conduct the vast majority of the arbitrage actions and systematically yield higher profits: our results provide empirical evidence that arbitrageurs are few and sophisticated users, characterized by the ability to incorporate information and to quickly react to exogenous shocks within short time scale intervals.
Item Type: | Journal Article | ||||||||
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Subjects: | H Social Sciences > HB Economic Theory H Social Sciences > HG Finance |
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Divisions: | Faculty of Social Sciences > Politics and International Studies | ||||||||
Library of Congress Subject Headings (LCSH): | Arbitrage , Bitcoin , Cryptocurrencies , Digital currency, Economics -- Psychological aspects, Foreign exchange rates | ||||||||
Journal or Publication Title: | Journal of Economic Behavior & Organization | ||||||||
Publisher: | Elsevier BV | ||||||||
ISSN: | 0167-2681 | ||||||||
Official Date: | September 2023 | ||||||||
Dates: |
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Volume: | 213 | ||||||||
Page Range: | pp. 251-270 | ||||||||
DOI: | 10.1016/j.jebo.2023.07.025 | ||||||||
Status: | Peer Reviewed | ||||||||
Publication Status: | Published | ||||||||
Access rights to Published version: | Open Access (Creative Commons) | ||||||||
Date of first compliant deposit: | 19 September 2023 | ||||||||
Date of first compliant Open Access: | 20 September 2023 |
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