Blockchain Papers

Anand Shah, Anu Bahri

No abstract is available for this record.

Sy, Malick, Morris, Sam

The cryptocurrency market has become increasingly accessible and significant to the financial markets. This is understood by not only major financial firms, governments, and investors, but also the individual market participants globally. We delve into the history of cryptocurrency to begin our examination of the Bitcoin, Ethereum and Litecoin. Understanding the circumstances of their humble beginning, the purpose it served, and the path of their evolution, helps us to create a fuller understanding of its functions, its limitations, and the drivers of its value. This enables us to identify key market factors and variables for deployment within a robust approach for pricing and product offerings associated with Bitcoin, Ethereum and Litecoin. In order to fully capture the volume, variety, and velocity of data associated with these cryptocurrencies, the use of machine learning can provide an advantageous approach to model development for cryptocurrency pricing. This paper provides the development of a promising initial prototype pricing model for Bitcoin, Ethereum and Litecoin. Our proposed pricing models resulted in an average 7% difference between actual and predicted price for Bitcoin and Ethereum, and a 4% difference for Litecoin along a timeline, through the use of machine learning and deep learning, artificial neural networks using the contributing factors of key variables and how they influence and capture pricing and investor behaviour. We also identify theinclusion of additional datasets, such as sentiment market data into the model, along with larger exploration of Blockchain and raw transaction mining to increase the accuracy and forecasting ability of the model.

Jackie Johnson, Mark Holub

No abstract is available for this record.

Nikolaus Hautsch, Christoph Scheuch, Stefan Voigt

No abstract is available for this record.

Anne Haubo Dyhrberg, Sean Foley, Jiří Švec

No abstract is available for this record.

Julia Reynolds, Leopold SSgner, Martin Wagner, Dominik Wied

This paper applies recently developed procedures to monitor and date so-called "financial marketdislocations", defined as periods in which substantial deviations from arbitrage parities take place. In particular, we focus on deviations from the triangular arbitrage parity for exchange rate triplets from a cointegration perspective. Due to increasing attention on and importance of mispricing in the market for cryptocurrencies, we include the cryptocurrency Bitcoin in addition to fiat currencies. We do not find evidence for substantial deviations from the triangular arbitrage parity when only traditional fiat currencies are concerned, but document significant deviations from triangular arbitrage parities in the newer markets for Bitcoin. We confirm the importance of our results for portfolio strategies by showing that a currency portfolio that trades based on our detected break-points outperforms a simple buy-and-hold strategy.

Christian Dinges

No abstract is available for this record.

Nikolaus Hautsch, Christoph Scheuch, Stefan Voigt

Distributed ledger technologies replace central counterparties with time-consuming consensus protocols to record the transfer of ownership. This settlement latency slows down cross-market trading and exposes arbitrageurs to price risk. We theoretically derive arbitrage bounds induced by settlement latency. Using Bitcoin orderbook and network data, we estimate average arbitrage bounds of 121 basis points, explaining 91% of the cross-market price differences, and demonstrate that asset flows chase arbitrage opportunities. Controlling for inventory holdings as a measure of trust in exchanges does not affect our main results. Blockchain-based settlement without trusted intermediation thus introduces a non-trivial friction that impedes arbitrage activity.

Minh Tri Lam

Blockchain has been perceived by many professionals as the next revolution of humankind. Its application spreads across multiple industries and aspects of life, but the first impact was to be found in finance. In 2017, cryptocurrency became a new financial phenomenon around the globe when Bitcoin’s value skyrocketed to the peak of $19.535. Many investors, both professional and amateur, have taken part in this modern trend of trading. Unfortunately, a number of those experienced losses due to various reasons. Among which a prominent heuristic called “anchoring” might be one of the causes of incorrect assessment leading to potential damages. Several studies in the past have validated the existence of anchoring bias in conventional stock market. However, current literature failed to address similar effect in cryptocurrency market. This thesis examines the presence of Bitcoin price anchoring in trading decisions of investors. Order dataset, including bids and asks, were collected from Kraken exchange to serve the analysis purpose. The analysis has confirmed that investors’ trading decisions anchored to changes in Bitcoin market price. Furthermore, the result tells that anchoring bias influenced investors’ valuation of price differently when they placed bid or ask orders. Nonetheless, its impact does not vary between bull and bear market situations. In conclusion, investors should be well aware of anchoring bias when making trading decisions. The heuristic can lead to both negative and positive consequences, depending on investor’s perception toward it.

Robin Hui Huang

This paper examines the market for initial coin offerings (ICOs). ICOs are smart contracts based on blockchain technology that are designed for entrepreneurs to raise external finance by issuing tokens without an intermediary. Unlike existing mechanisms for early-stage finance, tokens potentially provide investors with rapid opportunities thanks to liquid trading platforms. The marketability of tokens offers novel insights into entrepreneurial finance, which I explore in this paper. First, I document that investors earn on average 8.2% on the first day of trading. However, about 40% of all ICOs destroy investor value on the first day of trading. Second, I explore the determinants of market outcomes and find that management quality and the ICO profile are positively correlated with the funding amount and returns, whereas highly visionary projects have a negative effect. Among the 21% of all tokens that get delisted from a major exchange platform, highly visionary projects are more likely to fail, which investors anticipate. Third, I explore the sensitivity of the ICO market to adverse industry events such as China's ban of ICOs, the hack of leading ledgers, and the marketing ban on FaceBook. I find that the ICO market is highly susceptible to such environmental shocks, resulting in substantial welfare losses for investors.

Sofia Anyfantaki, Stelios Arvanitis, Nikolas Topaloglou

No abstract is available for this record.

Mohammad Jafarinejad, Hamid Sakaki

No abstract is available for this record.

Thanos Andrikopoulos, Robert Hudson, Saeed Akbar, Darius Saftoiu

No abstract is available for this record.

Anton Kajtazi, Andrea Moro

No abstract is available for this record.

Christian Masiak, Joern Block, Tobias Masiak, Matthias Neuenkirch · 5 authors

We apply time series analysis to investigate the market cycles of Initial Coin Offerings (ICOs) as well as bitcoin and Ether. Our results show that shocks to ICO volumes are persistent and that shocks in bitcoin and Ether prices have a substantial and positive effect on these volumes – with the effect of bitcoin shocks being of shorter duration than that of Ether shocks. Moreover, higher ICO volumes cause lower bitcoin and Ether prices. Finally, bitcoin shocks positively influence Ether but not the other way round. Our study has implications for financial practice, in particular for cryptocurrency investors and entrepreneurial firms conducting ICOs.

Min Luo, Vasileios E. Kontosakos, Athanasios A. Pantelous, Jian Zhou

No abstract is available for this record.

Takahiro Hattori, Ryo Ishida

No abstract is available for this record.

Stefano Colucci

No abstract is available for this record.

Alexander Brauneis, Roland Mestel, Ryan Riordan, Erik Theissen

We study trading of Bitcoin against US dollar (BTCUSD) on exchanges in three continents, Bitfinex, Bitstamp and Coinbase Pro. We use a high frequency dataset that contains transactions and order book information. The BTCUSD market is highly liquid in terms of bid-ask spreads and order book depth. While spreads are even lower than in equity markets, prices are not integrated across exchanges. Persistent differences exist between the three exchanges in terms of trade prices and posted prices often violating no-arbitrage assumptions. The liquidity of the Bitcoin exchanges is predominantly determined by local factors and is essentially independent of liquidity in equity and FX markets. This suggests that despite the virtual nature of Bitcoin, local jurisdictional factors affect the flow of capital between low and high price jurisdictions.

Éric Ghysels, Giang Nguyen

We examine price discovery and liquidity provision in the secondary market for bitcoin—an asset with a high level of speculative trading. Based on BTC-e’s full limit order book over the 2013–2014 period, we find that order informativeness increases with order aggressiveness within the first 10 tiers, but that this pattern reverses in outer tiers. In a high volatility environment, aggressive orders seem to be more attractive to informed agents, but market liquidity migrates outward in response to the information asymmetry. We also find support to the Markovian learning assumption often made in theoretical models of limit order markets.

Alla Petukhina, Simon Trimborn, Wolfgang Karl Härdle, Hermann Elendner

No abstract is available for this record.

Hanlin Yang

No abstract is available for this record.

Tatja Kärkkäinen

Following the popularity of Bitcoin trading in recent years, Bitcoin futures were introduced in December 2017 as an effort to provide institutional and retail investors with additional trading tools for Bitcoin. This study analyses the Bitcoin futures mid-quote data from CBOE, and Bitcoin market index applying VAR and VECM process methodologies, Hasbrouck’s information share and the Gonzalo-Granger component share measurement to examine price discovery in Bitcoin markets. Furthermore, the chapter seeks to assess the Bitcoin market microstructure. The results drawn on the intra-day prices show that the futures are leading the price discovery at different frequencies even with comparably low futures trading volumes. This supports the extant literature of futures-spot market price discovery and the role of informed traders in the futures market.

Lawrence J. Trautman, Taft Dorman

No abstract is available for this record.