Insights from bitcoin trading

Abstract

Abstract We examine commonality in returns and volume for Bitcoin–fiat currency pairs, each trading in a country with a single time zone. Bitcoin has substantial volume and obeys the theory related to commonality, liquidity, and price discovery. We find evidence that one common factor explains 68% of the variance in hourly volume. Though trading is higher on weekdays, there is substantial weekend trading, reflecting high retail participation. Volume is higher on exchanges during local working hours, as seen in forex markets, supporting the view that trading patterns depend on the location of trade rather than the location of the asset traded.