On the quality of cryptocurrency markets : centralized versus decentralized exchanges

Andrea Barbon, Angelo Ranaldo

Despite the growing adoption of decentralized exchanges, little is known about their market quality. Using a comprehensive dataset, we compare decentralized blockchain-based venues (DEXs) to centralized crypto exchanges (CEXs) assessing two aspects of market quality: price efficiency and market liquidity.We find that CEXs provide better market quality and identify the main friction dampening DEX efficiency as the high gas price stemming from proof-of-work blockchains.We propose and empirically validate a stylized model of DEX liquidity provision, linking trading volume, protocol fees, and liquidity. We identify quantitative conditions needed for DEXs to overtake CEXs in the future

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Year of publication:	[2022] ; This draft: April 2022
Authors:	Barbon, Andrea ; Ranaldo, Angelo
Publisher:	Geneva : Swiss Finance Institute
Subject:	Market Quality \| Decentralized Exchanges \| Automated Market Making \| Blockchain \| Decentralized Finance \| Limit Order Book \| Virtuelle Währung \| Virtual currency \| Marktmechanismus \| Market mechanism \| Marktmikrostruktur \| Market microstructure \| Elektronisches Handelssystem \| Electronic trading \| Wertpapierhandel \| Securities trading \| Börsenhandel \| Stock exchange trading \| Finanzmarktregulierung \| Financial market regulation \| Kapitalmarkttheorie \| Financial economics \| Dezentralisierung \| Decentralization

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Extent:	1 Online-Ressource (circa 49 Seiten) Illustrationen
Series:	Research paper series / Swiss Finance Institute. - Geneva, ZDB-ID 2392286-2. - Vol. no 22, 38
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Graue Literatur ; Non-commercial literature ; Arbeitspapier ; Working Paper
Language:	English
Other identifiers:	10.2139/ssrn.3984897 [DOI]
Classification:	G14 - Information and Market Efficiency; Event Studies
Source:	ECONIS - Online Catalogue of the ZBW

Persistent link: https://www.econbiz.de/10013192214