Skip to main content
Erschienen in:

25.05.2023

Law of one price and return on Arbitrage Trading: Bitcoin vs. Ethereum

verfasst von: Andrei Shynkevich

Erschienen in: Journal of Economics and Finance | Ausgabe 3/2023

Einloggen

Aktivieren Sie unsere intelligente Suche, um passende Fachinhalte oder Patente zu finden.

search-config
loading …

Abstract

Decentralized cryptocurrencies are characterized by decentralized trading taking place concurrently at multiple exchanges. Price deviations in two major cryptocurrencies are investigated across six major cryptoexchanges. Trading in both bitcoin and ethereum has become more integrated across different cryptoexchanges since 2018. Bitcoin and ethereum spot many similarities in the behavior of price deviations for any given pair of exchanges and share similar trading dynamics on the same cryptoexchange. Returns on arbitrage trading of bitcoin and of ethereum exhibit very similar dynamics and properties across different cryptoexchanges, as well as over time. Profitable opportunities for arbitrage trading of either cryptocurrency across different cryptoexchanges have declined significantly since 2018. An introduction of a financial derivative traded at a regulated exchange that allows to benefit from decline in the price of bitcoin is found to have a significant impact on the dynamics of trading of both bitcoin and ethereum in the respective decentralized spot markets.

Sie haben noch keine Lizenz? Dann Informieren Sie sich jetzt über unsere Produkte:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Fußnoten
2
Although the Chicago Board Options Exchange (CBOE) had introduced its bitcoin futures a week earlier on December 10, 2017, trading volume for the new contract was negligible until the first trading day of the CME’s bitcoin futures.
 
Literatur
Zurück zum Zitat Ben-David I, Franzoni F, Moussawi R (2018) Do ETFs increase volatility? J Finance 73:2471–2535CrossRef Ben-David I, Franzoni F, Moussawi R (2018) Do ETFs increase volatility? J Finance 73:2471–2535CrossRef
Zurück zum Zitat Brandvold M, Molnár P, Vagstad K, Valstad OCA (2015) Price discovery on Bitcoin exchanges. J Int Financ Mark Inst Money 36:18–35CrossRef Brandvold M, Molnár P, Vagstad K, Valstad OCA (2015) Price discovery on Bitcoin exchanges. J Int Financ Mark Inst Money 36:18–35CrossRef
Zurück zum Zitat De Jong A, Rosenthal L, van Dijk M (2009) The risk and return of arbitrage in dual-listed companies. Rev Financ 13:495–520CrossRef De Jong A, Rosenthal L, van Dijk M (2009) The risk and return of arbitrage in dual-listed companies. Rev Financ 13:495–520CrossRef
Zurück zum Zitat Delcoure N, Zhong M (2007) On the premiums of iShares. J Empir Finance 14:168–195CrossRef Delcoure N, Zhong M (2007) On the premiums of iShares. J Empir Finance 14:168–195CrossRef
Zurück zum Zitat Engle R, Sarkar D (2006) Premiums-discounts and exchange traded funds. J Deriv 13(4):27–45CrossRef Engle R, Sarkar D (2006) Premiums-discounts and exchange traded funds. J Deriv 13(4):27–45CrossRef
Zurück zum Zitat Fostel A, Geanakoplos J (2012) Tranching, CDS, and asset prices: how financial innovation can cause bubbles and crashes. Am Economic Journal: Macroeconomics 4(1):190–225 Fostel A, Geanakoplos J (2012) Tranching, CDS, and asset prices: how financial innovation can cause bubbles and crashes. Am Economic Journal: Macroeconomics 4(1):190–225
Zurück zum Zitat Froot K, Dabora E (1999) How are stock prices affected by the location of trade? J Financ Econ 53:189–216CrossRef Froot K, Dabora E (1999) How are stock prices affected by the location of trade? J Financ Econ 53:189–216CrossRef
Zurück zum Zitat Gagnon, Karolyi (2010) Multi-market trading and arbitrage. J Financ Econ 97:53–80CrossRef Gagnon, Karolyi (2010) Multi-market trading and arbitrage. J Financ Econ 97:53–80CrossRef
Zurück zum Zitat Giovannini A (1988) Exchange rates and traded goods prices. J Int Econ 24(1–2):45–68CrossRef Giovannini A (1988) Exchange rates and traded goods prices. J Int Econ 24(1–2):45–68CrossRef
Zurück zum Zitat Grammig J, Melvin M, Schlag C (2005) Internationally cross-listed stock prices during overlapping trading hours: price discovery and exchange rate effects. J Empir Finance 12:139–164CrossRef Grammig J, Melvin M, Schlag C (2005) Internationally cross-listed stock prices during overlapping trading hours: price discovery and exchange rate effects. J Empir Finance 12:139–164CrossRef
Zurück zum Zitat Isard P (1977) How far can we push “the law of one price”? Am Econ Rev 67:942–948 Isard P (1977) How far can we push “the law of one price”? Am Econ Rev 67:942–948
Zurück zum Zitat Kim T (2017) On the transaction cost of Bitcoin. Finance Res Lett 23:300–305CrossRef Kim T (2017) On the transaction cost of Bitcoin. Finance Res Lett 23:300–305CrossRef
Zurück zum Zitat Knetter MM (1989) Price discrimination by U.S. and german exporters. Am Econ Rev 79(1):198–210 Knetter MM (1989) Price discrimination by U.S. and german exporters. Am Econ Rev 79(1):198–210
Zurück zum Zitat Knetter MM (1993) International comparisons of price-to-market behavior. Am Econ Rev 83(3):473–486 Knetter MM (1993) International comparisons of price-to-market behavior. Am Econ Rev 83(3):473–486
Zurück zum Zitat Kroeger A, Sarkar A (2017) The law of one bitcoin price? Federal Reserve Bank of Philadelphia Kroeger A, Sarkar A (2017) The law of one bitcoin price? Federal Reserve Bank of Philadelphia
Zurück zum Zitat Krückeberg S, Scholz P (2020) Decentralized efficiency? Arbitrage in bitcoin markets. Financial Anal J 76(3):135–152CrossRef Krückeberg S, Scholz P (2020) Decentralized efficiency? Arbitrage in bitcoin markets. Financial Anal J 76(3):135–152CrossRef
Zurück zum Zitat Lamont OA, Thaler RH (2003) Anomalies: the law of one price in financial markets. J Economic Perspect 17(4):191–202CrossRef Lamont OA, Thaler RH (2003) Anomalies: the law of one price in financial markets. J Economic Perspect 17(4):191–202CrossRef
Zurück zum Zitat Makarov I, Schoar A (2020) Trading and arbitrage in cryptocurrency markets. J Financ Econ 135:293–319CrossRef Makarov I, Schoar A (2020) Trading and arbitrage in cryptocurrency markets. J Financ Econ 135:293–319CrossRef
Zurück zum Zitat Marshall BR, Nguyen NH, Visaltanachoti N (2013) ETF arbitrage: Intraday evidence. J Bank Finance 37:3486–3498CrossRef Marshall BR, Nguyen NH, Visaltanachoti N (2013) ETF arbitrage: Intraday evidence. J Bank Finance 37:3486–3498CrossRef
Zurück zum Zitat Petajisto A (2017) Inefficiencies in the pricing of exchange-traded funds. Financial Anal J 73(1):24–54CrossRef Petajisto A (2017) Inefficiencies in the pricing of exchange-traded funds. Financial Anal J 73(1):24–54CrossRef
Zurück zum Zitat Richardson JD (1978) Some empirical evidence on commodity arbitrage and the law of one price. J Int Econ 8(2):341–351CrossRef Richardson JD (1978) Some empirical evidence on commodity arbitrage and the law of one price. J Int Econ 8(2):341–351CrossRef
Zurück zum Zitat Richie N, Daigler RT, Gleason KC (2008) The limits to stock index arbitrage: examining S&P 500 futures and SPDRS. J Futur Mark 28:1182–1205CrossRef Richie N, Daigler RT, Gleason KC (2008) The limits to stock index arbitrage: examining S&P 500 futures and SPDRS. J Futur Mark 28:1182–1205CrossRef
Zurück zum Zitat Rogoff K (1996) The purchasing power parity puzzle. J Econ Lit 34:647–668 Rogoff K (1996) The purchasing power parity puzzle. J Econ Lit 34:647–668
Zurück zum Zitat Rosenthal L, Young C (1990) The seemingly anomalous price behavior of Royal Dutch/Shell and Unilever N.V./PLC. J Financ Econ 26:123–141CrossRef Rosenthal L, Young C (1990) The seemingly anomalous price behavior of Royal Dutch/Shell and Unilever N.V./PLC. J Financ Econ 26:123–141CrossRef
Zurück zum Zitat Shynkevich A (2021) Impact of bitcoin futures on the informational efficiency of bitcoin spot market. J Futur Mark 41:115–134CrossRef Shynkevich A (2021) Impact of bitcoin futures on the informational efficiency of bitcoin spot market. J Futur Mark 41:115–134CrossRef
Zurück zum Zitat Yermack D (2014) Is bitcoin a real currency? An economic appraisal. Working Paper No. 19747, NBER Yermack D (2014) Is bitcoin a real currency? An economic appraisal. Working Paper No. 19747, NBER
Metadaten
Titel
Law of one price and return on Arbitrage Trading: Bitcoin vs. Ethereum
verfasst von
Andrei Shynkevich
Publikationsdatum
25.05.2023
Verlag
Springer US
Erschienen in
Journal of Economics and Finance / Ausgabe 3/2023
Print ISSN: 1055-0925
Elektronische ISSN: 1938-9744
DOI
https://doi.org/10.1007/s12197-023-09631-0

Weitere Artikel der Ausgabe 3/2023

Journal of Economics and Finance 3/2023 Zur Ausgabe

Premium Partner