Pricing and arbitrage in cryptocurrency markets

Abstract

Cryptocurrencies have garnered an increasing amount of attention and grown dramatically in value. Like financial assets, they are traded continuously across a number of exchanges. This thesis presents the design and implementation of a system for real-time data collection of pricing and trading activity for four cryptocurrencies across three exchanges. Using the data collected for the US Dollar to cryptocurrency order books from May 4, 2018 to May 9, 2018 we find that arbitrage opportunities exist in 0.03% to 40.38% of five-second intervals depending on the specific cryptocurrency and exchanges considered. Analysis of the signed trading volume shows that trading behavior differs in the presence of these arbitrage opportunities, but we find only weak evidence suggesting that market participants actively exploit such opportunities on sub-minute timescales.