Abstract
This paper studies the efficiency of the cryptocurrency market by looking at the distribution of bitcoin prices over time and across exchange-currency pairs. We document persistent differences in relative bitcoin prices (or discounts), with a half-life of 1 day, and a distribution which is leptokurtic, skewed to the right, with a standard deviation of 3.9%. The variability of discounts is larger in countries with tighter capital controls due to the combined effect of market segmentation and local supply and demand shocks, which we relate to location-specific mining activities and investor attention.
•Large, persistent bitcoin price differences: Bitcoin prices diverge significantly across exchanges and currency pairs, posing questions about market efficiency and cross-border payment systems.•Comprehensive analysis of bitcoin price dispersion: The paper considers 135 global exchanges and documents the distribution of daily bitcoin prices, revealing significant and varying discounts for both fiat and crypto pairs.•Importance of location: location component accounts for at least 50 percent of this total variability for fiat pairs.•Market segmentation: stricter capital controls increase discount variability, amplifying local supply-demand shocks, proxied by mining activities and investor attention.