Fragmentation in the Bitcoin market: Evidence from multiple coexisting order books

We explore the consolidated order book of five major exchanges to investigate how fragmentation affects the Bitcoin market. Using intraday snapshots of the order book data, we find that the Bitcoin market is quite fragmented, wherein the exchange liquidity measure is significantly negative, even for small transactions. Our results suggest that consolidation tools, such as smart order routers, can be effective in reducing the cost of trading, and that further development of the Bitcoin marketâs trading and regulation is needed.