Ether_Microstructure_AcceptedVersion.pdf (1.18 MB)
Price discovery and microstructure in ether spot and derivative markets
journal contribution
posted on 2023-06-09, 20:59 authored by Carol AlexanderCarol Alexander, Jaehyuk Choi, Hamish R A Massie, Sungbin SohnEthereum is an important blockchain, being the first and most popular public platform for the smart contracts underpinning financial transactions, time-stamping of supply chains, decentralized applications and initial coin offerings. Ethereum's cryptocurrency, ether, is actively traded on centralized exchanges, second only to bitcoin. It has attracted investor's interest primarily because of its intrinsic value – small units of ether called ‘gas’ are used, essentially, as the fuel driving smart contract transactions on the Ethereum blockchain. We ask whether off-chain trading on ether derivatives plays a dominant role in ether spot price discovery, thereby driving ether's utility value for on-chain activity. Using minute-by-minute data we find that the ether perpetual swap on BitMEX, an unregulated cryptocurrency derivative exchange, has dominant trading volume and price discovery over the major spot exchanges. Furthermore, we identify interesting hour-of-day and day-of-week effects in trading volume on the spot exchanges, and these indicate that more informed institutional players are trading ether spot and derivatives.
History
Publication status
- Published
File Version
- Accepted version
Journal
International Review of Financial AnalysisISSN
1057-5219Publisher
ElsevierExternal DOI
Volume
71Page range
1-12Article number
a101506Department affiliated with
- Accounting and Finance Publications
Full text available
- Yes
Peer reviewed?
- Yes
Legacy Posted Date
2020-03-27First Open Access (FOA) Date
2021-11-22First Compliant Deposit (FCD) Date
2020-03-27Usage metrics
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