Price dynamics of cryptocurrencies in parallel markets: Evidence from Bitcoin exchanges in Brazil

Daniel Modenesi de Andrade, Fernando Barros Jr, Fabio Yoshio Motoki, Matheus Oliveira da Silva

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
6 Downloads (Pure)


Purpose: This paper aims to study the dynamics of bitcoin prices in Brazil, a large emerging economy with an unregulated bitcoin market. 

Design/methodology/approach: First, this study tests if the Law of One Price (LOOP) is valid for bitcoin prices in Brazil, conducting tests with data from three Brazilian exchanges. Next, this study documents bitcoin price dynamics in the short run by studying the price discovery mechanism in these exchanges. This study uses Information Share and Component Share, combining the two measures to obtain an Information Leadership Share (ILS) measure. 

Findings: This study finds a common trend within bitcoin prices among a set of exchanges, with cointegration tests between the price series indicating that LOOP is valid in Brazilian markets in the long run. ILS indicated that, for closing prices, the most liquid exchange (Foxbit) leads discovery, whereas the least liquid (Local Bitcoin) lags, with Mercado Bitcoin in the middle both in terms of discovery and liquidity. Finally, this study provides evidence that the price variation in the market that leads price discovery can be used to construct an arbitrage in another exchange. 

Originality/value: This research brings the first evidence of a price discovery mechanism for exchanges in Brazilian Reais. Although LOOP is valid in the long run, price leadership in bitcoin markets potentially create arbitrage opportunities in the short run. This study contributes to the growing literature of bitcoin prices with novel evidence from a large emerging economy.

Original languageEnglish
Pages (from-to)1040-1053
Number of pages14
JournalStudies in Economics and Finance
Issue number5
Early online date12 Aug 2021
Publication statusPublished - 18 Oct 2021


  • Bitcoin
  • Cryptocurrencies
  • Law of One Price
  • Price Discovery

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