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J. Risk Financial Manag. 2019, 12(1), 25; https://doi.org/10.3390/jrfm12010025

Testing Stylized Facts of Bitcoin Limit Order Books

Department of Statistics and Econometrics, University of Erlangen-Nürnberg, Lange Gasse 20, 90403 Nürnberg, Germany
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Received: 21 December 2018 / Revised: 17 January 2019 / Accepted: 30 January 2019 / Published: 5 February 2019
(This article belongs to the Special Issue Alternative Assets and Cryptocurrencies)
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Abstract

The majority of electronic markets worldwide employ limit order books, and the recently emerging exchanges for cryptocurrencies pose no exception. With this work, we empirically analyze whether commonly observed empirical properties from established limit order exchanges transfer to the cryptocurrency domain. Based on the literature, we establish a structured methodological framework to conduct analyses in a systematic and comprehensive way. We then present results from a unique and extensive limit order data set acquired from major cryptocurrency exchanges for the currency pair Bitcoin to US Dollar. We recover many observations from mature markets, such as a symmetry between the average ask and the average bid side of the order book, autocorrelation in returns on the smallest time scales only, volatility clustering and the timing of large trades. We also observe some idiosyncrasies: The distributions of trade size and limit order prices deviate from commonly observed patterns. Also, we find limit order books to be relatively shallow and liquidity costs to be relatively high when compared to established markets. View Full-Text
Keywords: limit order book; cryptocurrency; stylized fact; high-frequency finance; liquidity costs; transaction costs limit order book; cryptocurrency; stylized fact; high-frequency finance; liquidity costs; transaction costs
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This is an open access article distributed under the Creative Commons Attribution License which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited (CC BY 4.0).
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Schnaubelt, M.; Rende, J.; Krauss, C. Testing Stylized Facts of Bitcoin Limit Order Books. J. Risk Financial Manag. 2019, 12, 25.

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