Bitcoin [BTC], year-to-date, is up by over 110 percent while trailing its all-time-high by over 60 percent, which would invite skeptical questions about the cryptocurrency’s volatility and hence opportunities for arbitrage. However, in light of this fluctuation, the exchanges that tout “real” volume have vastly decreased opportunities for arbitrage, claims a recent report from Bitwise Asset Management.
Following their March report, Bitwise claims the quality of arbitrage among exchanges in the real BTC spot market is “remarkable.” Despite the cryptocurrency market lacking any sort of formal “Consolidate Tape,” as present with the stock market, the price on “real” exchanges are still “coordinated.”
Two main points highlighted by Bitwise to keep BTC prices in check are effective arbitrage and institutional market makers.
Citing the SEC’s claims on the topic of effective arbitrage in the cryptocurrency market, which Bitwise referred to as “unsubstantiated,” the report mentioned two points to demonstrate the same. Firstly, the alignment of the price across “trading venues, and secondly, the pace at which the price disparity cedes.
To balance out the price deviation, Bitwise, calculates the “consolidated price” based on the last traded price of BTC on the 10 “real” exchanges and equal-weight average them to calculate the consolidated price. This price is calculated every second. To compound the analysis, the research will analyze the average deviation of price on each exchange with the aforementioned consolidated price.
Bitwise contends that the analysis, based on the above premise, on a second-by-second basis since the beginning of 2019 shows that the exchanges trade very closely. The average deviation from any exchange varied from 0.06 percent as seen on Coinbase to 0.2 percent on Bitflyer. The average deviation, taking the price on all exchanges, stood at 0.12 percent.
The report stated that the average of 0.12 percent deviation is “well within the arbitrage band,” adding that this implied,