Markets have adapted to better price discovery even on days of extreme price volatility, making arbitrage strategies no longer the ‘go-to’.

A report into the liquidity of Bitcoin, published today by digital assets derivatives exchange ZUBR, reveals the crypto market has matured so significantly that traders and investors are having to re-think their strategies to remain competitive.

ZUBR’s report, covering data from 2017 to 2019, examines price discovery, market development and the relationship between volatility and liquidity based on trading volumes across regulated exchanges under a macro and micro lens.

Key findings from the report include:

Price discovery has fallen from 15% to less than 1% in just two years

In 2019, the price difference on days that experienced upwards of 20% from the low price to the high price saw a gap difference across exchanges all under 0.9%. In 2018, arbitrage gaps during extreme volatility reached 7%, and in 2017, as high as 15.5% 

The world’s two leading bitcoin exchanges are more similar than you think

Major differences can be seen between exchanges within the past few years, but the gap in price discovery from a bird’s eye lens show that markets are becoming more efficient in price discovery across markets. When comparing price differences for Coinbase versus Bitstamp, the gap now averages under 0.25% in 2019 between the daily highs. These price difference averages stood at almost double in previous years.

Opportunities from price swings have halved in three years

In 2017, 27% of the year saw price swings north of 10%. The amount of days that a price swing was larger than 10% in 2019 was less than half that at 12.6% of the year.

Bitcoin’s volatility still makes for a difficult Store-of-Value versus gold

A look at daily arbitrage lows and highs of gold in 2019 shows that during 92% of the year prices saw less than a 2% daily change. In 2019, Bitcoin saw price swings of less than 2% on just 47 days (less than 13% of the year). Gold’s peak volatility was well below 4%.

The liquidity-volatility relationship remains extremely problematic and unstable

Trading volumes monitored every one second by ZUBR show increasing liquidity gaps as prices go up. Lack of liquidity when markets begin to heat up leads to significant price jumps and, in turn, propels volatility even further. 

Ilgar Alekperov, CEO, ZUBR said:

“Our data shows just how much crypto exchanges and trading opportunities have changed over the course of three years. Investors used to visit spot exchanges to leverage arbitrage strategies. Now, we’re facing a more advanced trading world where crypto exchanges have standardised and price discovery has become so much more efficient. What we’re seeing as a result of these major changes is investors embracing other strategies and products, such as derivatives, in order to diversify and keep their competitive edge. It is a move towards the sort of comprehensive trading infrastructure we see within fiat markets.

“Investors need to be aware of these changes as they evaluate the crypto industry’s investment performance. This is the first of a series of reports ZUBR will be releasing, aimed at exploring and showcasing the opportunities of the asset class.”

ZUBR is a digital assets derivatives trading platform for hedge funds, HFT traders and other parties who bear cryptocurrency price exposure risks as a part of their operational activity. Currently in beta, ZUBR is due to launch in the first quarter of 2020.

You can read the full report, ‘Examination of Bitcoin liquidity, price discovery and market place development’, here:https://blog.zubr.io/examination-of-bitcoin-liquidity-price-discovery-and-market-place-development/

Notes to editors:

For further information, please contact:

Yellow Jersey PR:

Georgina Whittle, Associate Partner
[email protected]
M: +44 (0)7835 770 967 | T: +44 (0)20 3004 9512

Sarah Jehan, Account Director
[email protected]
M: +44 (0)7930 043 188 | T: +44 (0)20 3004 9512

About ZUBR

ZUBR is a high-performance exchange for digital asset derivatives, aimed at experienced and professional market participants and traders exploiting quantitative algorithmic and latency-sensitive trading strategies. 

ZUBR’s goal is the provide state of the art trading infrastructure to hedge funds, HFT traders and parties who bear cryptocurrency price exposure risks as part of their operational activity (miners, OTC desks, asset managers, payment providers and others).

Currently in beta for pre-registered clients, ZUBR is due to launch in the first quarter of 2020.