Bitwise Report 2.0: Trading Spread tight among “real exchanges”, Bitcoin market efficient post price rally

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As Bitwise Asset Management patiently awaits its decision from the US Securities and Exchange Commission [SEC], the firm has released yet another report detailing the Bitcoin spot market. Following their March proposal, Bitwise, among other things, highlights the tightening of trading spreads in the BTC spot market.

The report released on May 24, stated that the trading spreads on the BTC spot market are “substantially tighter” than perceived.

Bitwise clearly demarcates, right from the offset, between “real” and “fake” exchanges, based on volume. Coinbene, an exchange in the “fake” volume category posed over $500 million in volume with a spread of $12.22, while Coinbase, firmly in the “real” category, amassing $70 million volume with a spread of $0.01.

The report contends:

“This confusion exists because the data and volume on many exchanges is fake. The reality is that the real bitcoin spot market is extremely efficient, with spreads that rank amongst the lowest for any quoted financial instrument in the world.”

As the earlier report and this recent one highlights, only ten exchanges pose “real” volume with average median spread on each for the month of April being $1.31, or 10.7 percent of Coinbene’s individual spread. Bitwise highlights the five most liquid exchanges, with their corresponding median spreads as Bitstamp – $1.75, Binance – $1.12, Bitfinex – $0.4, Kraken – $0.1, and Coinbase – $0.01.

Last month, Bitcoin broke the $5,000 level quite early-on and the rally persisted till the end of April around the same mark, hence the median spread on the “largest real exchanges” was 0.01 percent – 0.03 percent, added the report.

In light of the variance, the report concluded:

“The relationship between trading volume and spread size is not perfect, as it is constrained by exchange-level fees, tick size, and other factors. Still, the relationship is strong, and the spreads on real exchanges are extremely small.”

The March report detailed market efficiency in terms of arbitrage opportunities based on the ten “real” exchanges. At its peak, during the December 2017 bull run, the deviation stood at 0.7 percent and since then, it has not crossed 0.5 percent. Interestingly, as the prices were suppressed in March, the average spread ranged from Coinbase’s $0.01 to Bitfinex’s $0.1 only.

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