Cryptocurrency prices differ across countries, and these price deviations fluctuate widely. We model cryptocurrencies as an asset immune from local government expropriation, and trust serves as the perceived probability of government misconduct. After political scandal outbreaks, Bitcoin prices rise by 1.31% and Ethereum prices by 0.83% relative to their U.S. dollar prices on average. The price deviation responses are larger in countries where citizens have less trust in government. With panel regressions, we show domestic cryptocurrency prices become more expensive when higher volumes of Google searches are related to domestic institutional failures.

We investigate the role of market microstructure metrics in predicting price dynamics for five cryptocurrencies. We show that measures of liquidity and price discovery have predictive power for price dynamics measures used in electronic market making, dynamic hedging strategies, and volatility estimation. We identify own market and cross-market effects for Roll measures and VPINs in BTC and ETH. Our results change little during crypto winter or the 2022 change in interest regimes. Market dynamics of cryptocurrencies are similar to those of futures but exhibit greater toxicity. Our findings are relevant for proposals regarding the appropriate regulatory structure for digital currencies.