Bitcoin price derivation

speculative bubbles, bitcoin price movements, volatility in cryptocurrency market Considering “Weekend Effect”, one derivation might be done through the.
Table of contents

After it has been updated the Fair Price will be equal to the Impact Mid Price, and then the Fair Price will float with regard to the Index Price and the time-to-expiry decay on the contract until the next update. Occasionally, due to index instability, a contract may need to be moved to an alternative mode, LastPriceProtected. Historically this has happened on the XBJ contracts due to pricing anomalies. Last Price Protected is a marking mode that functions similarly to simple Last Price marking, but with some protections for our users as not to cause unnecessary liquidations.

A price band is created equal to 1 maintenance margin 0.

Predictions and analysis

If the band moves, the Mark Price will stay. It is allowed to move toward the band but not away from it. Please note BitMEX does not support old browsers. We recommend upgrading to the latest version of Opera , Firefox , or Chrome. BXBT Although the distributions of price return in the five Bitcoin platforms are all fat-tail, they have obvious differences in the tail. It implies that the number of extreme values in bitFlyer is more than that of other platforms.

The risk in the financial markets is often governed by unpredictable extreme return, so the risk in bitFlyer is higher than the risk in other Bitcoin platforms. In this aspect, bitFlyer seems to be more abnormal compared to other four Bitcoin platforms. We investigate the decay of the price return. In addition, we find that the positive tail and negative tail are both approximately power-law decay Fig 2 b.

However, in traditional financial markets, most of the trading behaviors are under strict regulation. We investigate the dependence property of price return via the analysis on the autocorrelation of the price return. We first conduct the Ljung-Box test in price return series and absolute price return series. The results reject the null hypothesis, indicating that there exists autocorrelation in price return.

In Fig 3 a , we plot the autocorrelation of price return in different Bitcoin platforms.

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However, there exist differences in autocorrelation between bitFlyer and other Bitcoin platforms. The maximum positive autocorrelation is greater than 0. In bitFlyer, the maximum positive autocorrelation is roughly 0. Thus, compared to other Bitcoin platforms, bitFlyer has weaker positive autocorrelation and stronger negative autocorrelation. The weak positive autocorrelation indicates that bitFlyer appears more fluctuations. The strong negative autocorrelation is brought about by the market prevention that protects Bitcoin price from deviating actual value, implying that there are more violent fluctuations in bitFlyer.

Furthermore, we study the nonlinear dependence of price return. It decays more slowly compared with the linear autocorrelation.

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But it is not significant in bitFlyer. The autocorrelation of absolute return decreases more quickly, implying that the fluctuations in bitFlyer are more random and unpredictable. In previous sections, we find that the properties of price return in different Bitcoin platforms are incompletely consistent. The phenomena that have been largely observed in financial markets, such as fat-tail of price return, the absence of autocorrelation, and volatility clustering, are also found in the Bitcoin market. However, it can be shown that the properties are fairly different in bitFlyer from other Bitcoin platforms.

derivation

In spite of the different data coverage, all markets except bitFlyer exhibit similar statistical behaviors, but bitFlyer stands apart. In fact, the phenomena, such as fat-tail of price return, the absence of autocorrelation, and the volatility clustering, are well known as the stylized facts, which have been proven to be common across a wide range of instruments, markets, and time periods [ 22 , 28 , 29 ].

It indicates that these behaviors are independent of the selection of time periods. In this work, the time periods in OKCoin, Bitfinex, BTC-e, and Coinbase are different and time length varies from 2 months to 9 months, but the statistical behaviors are consistent and the same as many previous studies [ 21 — 25 , 28 , 29 ]. Thus, the obvious difference in bitFlyer from other platforms may be caused by possible illegal actions.

To find the possible reasons of abnormity, we consider the best price that traders quote. It is because the price adopted in this paper is the average of the best ask price and the best bid price. Thus, the abnormity in price return may be caused by the abnormity in best price that traders quote. We introduce the ratio: and , where b 1 t or a 1 t , b 2 t or a 2 t are the best bid or ask price and second best bid or ask price respectively. The value of ratio b or ratio a evaluate the deviation from best bid or ask order to second bid or ask order.

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In Fig 4 , we plot ratio a and ratio b in bitFlyer and Coinbase using the data collected from May 17, to July 16, It is found that most of ratio a and ratio b are smaller than 0. In addition, the extreme values of ratio a and ratio b appear simultaneously. It means that buyers and sellers quote price far beyond current best price higher than best bid or lower than best ask at the same time. In normal financial markets, it rarely occurs that the abnormal values of ratio a and ratio b frequently appear at the same time.

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One possible explanation is that one trader places abnormal ask orders lower than best ask while another trader places abnormal bid orders higher than best bid simultaneously. They try to manipulate the price by creating a false impression of an active market. If the abnormal ask orders and the abnormal bid orders are placed concurrently again and again during a certain time period, it may not be coincidental but deliberate.

Thus, it may be potentially linked to either price manipulation or money laundering. The KYC process verifies the identity of its clients and assess potential risks of illegal intentions for the business relationship.

It prevents financial institutions from being used, intentionally or unintentionally, by criminal elements for money laundering activities. The vulnerability of KYC policy may result in the money laundering or price manipulation, which verifies our conjecture. Therefore, the abnormity in bitFlyer may be caused by price manipulation or money laundering, essentially due to the absence of strict regulation.

To achieve price manipulation or money laundering, the ask bid price that traders quote is abnormal, naturally lower higher than current ask bid price. And these manipulating behaviors which are different from normal trading behaviors will reduce linear autocorrelation and nonlinear autocorrelation.

We find that the price returns in OKCoin, BTC-e, Coinbase, and Bitfinex have similar characteristics, including the fat-tail of the price return distribution, the power-law decay of price return distribution, and the autocorrelations of price return, which are entirely different in bitFlyer. It verifies our conjecture that there may exist abnormity or manipulation in Bitcoin platforms. In the future, we would collect more information to confirm whether bitFlyer is in price manipulation or money laundering. Besides, we would validate our conclusion in more Bitcoin exchange platforms.

Browse Subject Areas? Click through the PLOS taxonomy to find articles in your field. Abstract The Bitcoin market becomes the focus of the economic market since its birth, and it has attracted wide attention from both academia and industry. To ensure that the result of the experiment is persuasive and reliable, we choose five leading exchange platforms in China, Russia, United States, Japan as follows: OKCoin is the largest Bitcoin exchange platform in China which was founded in It consists of millions of users and billions of turnovers per day.

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Until now, it is still the top 10 Bitcoin platform. BTC-e is a leading exchange headquartered in Russia. It is one of the earliest Bitcoin exchange platforms in the world. Coinbase is a Bitcoin trading platform established in the USA. The users in Coinbase reached 20 million in , which is more than other Bitcoin platforms.

The number of users in bitFlyer is more than 2 million. It was reported that the trading volume ranked the first after the legalization of Bitcoin in Japan. Download: PPT. Table 1. Table 2. Fig 4. The values ratio a and ratio b in bitFlyer and Coinbase, sampled from May 17, to July 16, References 1. Physica A: Statistical Mechanics and its Applications. View Article Google Scholar 2. A permutation information theory tour through different interest rate maturities: the Libor case.


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Distinguishing manipulated stocks via trading network analysis. View Article Google Scholar 8. Degree-strength correlation reveals anomalous trading behavior. Detecting anomalous traders using multi-slice network analysis. View Article Google Scholar Trading network predicts stock price. Scientific reports. Market confidence predicts stock price: Beyond supply and demand. PloS one.