Decentralized Efficiency? Arbitrage in Bitcoin Markets

Frequent and sizable arbitrage opportunities exist to exploit price differences for bitcoin across cryptocurrency exchanges. The authors find profit opportunities in excess of $377 million in 2017 and $384 million in the first quarter of 2018.

Overview

Using tick-level bitcoin data from February 2013 through April 2018, we show substantial arbitrage spreads between global bitcoin markets. Spreads follow multiple consistent patterns. Minimum and maximum prices show significant clustering. Spreads increase during the early hours of a day (according to coordinated universal time), when new exchanges enter markets, and following bitcoin heists and hacks. The full year 2017 and the first quarter of 2018 each had exploitable net arbitrage profit opportunities of at least USD380 million that smart money failed to capture. Based on long-term analyses, we also found that bitcoin market inefficiency has increased over time.