Journal of Financial Markets 2026
Microstructure and market dynamics in crypto markets
Abstract
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.
- DOI
- 10.1016/j.finmar.2026.101071
- Pages
- 101071
- Language
- en
- Sources
- crossref openalex