A High Frequency Analysis of Bitcoin Markets

We study Bitcoin (BTC) exchanges on three continents, Bitfinex, Bitstamp and GDAX. We use a high frequency dataset that contains both transactions data and snapshots of the BTC to US dollar (BTCUSD) order book. The BTCUSD market is highly liquid in terms of bid-ask spreads and order book depth. While spreads are low, we find large differences between the three exchanges in terms of transaction and posted prices. The price differences fall over our sample period meaning that markets are becoming more integrated. We show that exchanges play an increasingly important role in the transfer of BTC. At the end of 2017, exchanges processed roughly 30\% of BTC transfers at the end of our sample period this increases to 90%.