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True liquidity and price discovery in crypto space

Coinbase is a liquidity leader among established digital asset exchanges in BTC/USD pair. Bitstamp and Kraken follow closely while Bitfinex, Binance, and Bittrex leg behind.


TL;DR


(1) Coinbase Pro provides the best bitcoin liquidity and execution opportunities in the cryptocurrency market. Bitstamp and Kraken are a very good choice for institutional and retail investors respectively. Bitfinex offers deep liquidity at the top of the book.


(2) Liquidity is an important criterion for selecting an exchange because it is easier to produce artificial (fake) volume than artificial liquidity, which generally implies a market risk for a fraudulent exchange.


(3) The analysis of order book dynamics is illustrative of how price discovery works. The ecosystem is highly correlated and originating price shifts trigger almost immediate price movements on other exchanges. However, the high reported volume doesn’t automatically mean price discovery. The spike on April 2, 2019, was likely to be originated on Bitfinex, while other exchanges followed the trend.


(4) Binance has a very odd histogram of intervals between consequent trades. It looks like a sinusoidal function with a descending trend. However, other exchanges have suspicious outliers, too.


The analysis is based on the BTC/USD (BTC/USDT in case of Binance) data from 0:00 UTC 12-Apr-2019 till 0:00 UTC 17-Apr-2019 across six selected exchanges: Binance, Bitfinex, Bitstamp, Bittrex, Coinbase Pro and Kraken.


Read more on our Medium blog.



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