Price Impact of Order Book Events in Bitcoin Market

1 Abstract This thesis examines the price impact of order book events in the Bitcoin mar- ket. Using the data obtained from Binance exchange, the thesis shows that short-term price changes can be explained by high-frequency demand-supply interaction depicted in the Limit Order Book (LOB). The thesis demonstrates that the instantaneous price impact function has a non-linear shape, indicating that small and large orders have di↵erent e↵ects on price, potentially leading to opportunities for price manipulation and quasi-arbitrage. Additionally, the analysis confirms the inverse relation between the price impact coe cient and market depth. Furthermore, the thesis observes that there are no clear intraday patterns for the price impact coe cient. These findings provide valuable insights into the understanding of Bitcoin's price dynamics, benefiting traders, investors, and policymakers seeking to understand the complexities of the cryptocurrency market.