Faculty of Economics and Business Administration Publications Database

What Drives the Competition of Cryptocurrency Exchanges? Examining the Role of the Market and Community

Link External Source: Online Version
Year: 2017
Keywords: Cryptocurrencies; Exchanges; Competition; Bitcoin; Fiat Currencies; Trading; Market; Community; Reddit

This exploratory study investigates drivers of the competition between cryptocurrency exchanges. We specifically examine the impact of the market as well as the community on two distinct types of competition - the competition for trading frequency and the competition for trading quantity. In our empirical analysis, we draw on a comprehensive data sample compiled from three data sources. The data includes 24 Bitcoin-fiat currency pairs traded on 79 cryptocurrency exchanges, 71,516 associated posts extracted from a corpus of 2.13bn Reddit posts and Wikipedia search data. We find that the competition for trading frequency is driven by both the market as well as the community whereas the competition for trading quantity is driven solely by the market. We contribute to theory and practice by providing a first understanding of drivers of the competition of cryptocurrency exchanges. In addition, we introduce a new competition measure that is based on the trading frequency.