| Summary: | 碩士 === 中原大學 === 財務金融研究所 === 105 === Bitcoin is an online, peer-to-peer anonymous electronic currency. According to the report from New York Times, there are 42% Bitcoin’s transaction volume has been performed in China during the first half of 2016, making China become the largest trading volume country for Bitcoin then. The main reason is that the Chinese bought Bitcoin in order to preventing Chinese government from foreign exchange control. They exchanged RMB into the Bitcoin, then exchanged the Bitcoin into the US dollars.
After the US President election in 2016, the US dollar was strongly rebounded, thus causing the dramatic devaluation of the RMB, then making the Chinese bought more Bitcoins than before to further protect their account’s value. In order to prevent from the outflow of funds and causing other financial risks, the Chinese government asked the officers who are in charge of the Bitcoin trading platform to comply with foreign exchange regulations and asked them to raise the Bitcoin’s handling fee from 0% up to 0.2%.
This study examines the top four Bitcoin currency exchanges in the world to find whether investors can earn the spreads of the Bitcoin from the cross-border exchanges. The targeted Bitcoin exchanges are Okcoin and Bitfinex in China, and Kraken and Coinbase in the US. The study period is divided into four sub-periods. This investigation uses the time series model to examine the relationship between various virtual currencies. This study also examines whether the price inconsistency exists between United States and China after the Chinese government strongly supervised the Bitcoin exchanges and charged the transaction fees. We also examined whether the investors can earn more spreads in cross-border exchanges than before and whether they can not earn spreads between the two Bitcoin exchanges in China after the strong supervision executed by Chinese government. The conclusions are summarized below.
1. This study found that, during the four sub-periods, there were six pairs having cointegration relationships, indicating that the Bitcoin prices among the four exchanges affected each other during that time period.
2. Empirical results showed that the higher the transaction fee, the higher the arbitrage spread exists in cross-border exchanges, and the average profit margin increased dramatically between these exchanges. However, the exchanges in China can not earn spreads after government’s strong supervision.
3. This study also finds that, after Chinese government’s supervision on Bitcoin exchanges, the transaction costs greatly increased, and the average arbitraged profit in the cross-border transactions increased by more than four times.
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