Informational Content of Exchange Flows in Cryptocurrency Markets

How predictable are the prices and liquidities of cryptocurrencies listed at different exchanges? We analyze price, trading volume, and in-and-out flows of Bitcoin and Ethereum at multiple crypto-exchanges using cross-sectional analysis. We examine the intraday data at hourly intervals from January 1st, 2018 to September 30th, 2019. The results show that returns, trading volumes, and net flows in different crypto-exchanges predict each other significantly. In particular, the movement in big exchanges presents a disproportionately large predictive impact on the movement in other markets. Therefore, inefficiencies are prevalent in crypto-markets, and the cross-sectional analysis for exchanges is essential for traders in the market.