High Frequency Price Change Spillovers in Bitcoin Markets

Abstract

The study of connectedness is key to assess spillover effects and identify lead-lag relationships among market exchanges trading the same asset. By means of an extension of Diebold and Yilmaz (2012) econometric connectedness measures, we examined the relationships of five major Bitcoin exchange platforms during two periods of main interest: the 2017 surge in prices and the 2018 decline. We concluded that Bitfinex and Gemini are leading exchanges in terms of return spillover transmission during the analyzed time-frame, while Bittrexs act as a follower. We also found that connectedness of overall returns fell substantially right before the Bitcoin price hype, whereas it leveled out during the period the down market period. We confirmed that the results are robust with regards to the modeling strategies.