This picture represents the results of a bitcoin (BTC) price discovery analysis between the highly-controversial Binance exchange and three semi-regulated crypto exchanges, Coinbase, Bitstamp and Kraken. We consider a six-dimensional system of bitcoin prices on the three semi-reguated exchanges and Binance's BTCUSD spot price, its "inverse" perpetual price and the infamous bitcoin-tether BTCUSDT "direct" contract that is the main emitter of risk into the crypto asset ecosystem (see this recent paper).
Taking a vertical slice through the picture at any point in time gives % shares. So, for example, at the end of June 2021 -- the far right side -- over 70% altogether is ascribed to Binance (green): over 25% on BTCUSDT direct perpetual (light green); another 20% on BTCUSD inverse perpetual (mid green), and about 15% on the spot (dark green). That leaves 30% for the semi-regulated spot markets, of which Coinbase (light blue) has the largest share ... about 22%.
We can interpret these % as follows: within this 6-dimensional system, 70% of bitcoin price movements start on Binance and are then followed by the other exchanges. Only 30% start on the semi-regulated exchanges (mostly on Coinbase) with Binance following.
Here is a similar plot, this time for Bybit. Like Binance, they have BTCUSD and BTCUSDT but the influence of Bybit -- in a (now) 5-dimensional system with the semi-regulated exchanges -- is vastly different. Here, Coinbase is the clear price leader. But when you put Coinbase with Binance's tether perpetual, its the tether perpetual that usually leads the price formation.....
There is a lot more behind all this than a few graphs -- a highly sophisticated econometric model and minute-level OHLCV prices on 11 products altogether. Importantly, we identify time-of-day patterns in trading volume and link this to price leadership effects. We conclude that Binance's leading effect on bitcoin prices in other markets is greatest during US time zones.
Now, that is definitely something for US regulators to focus on, given the complete disregard for regulation from CZ, Binance's CEO. And, that about 75% (or more) of tether ends up on Binance. Would the market cap of tether now exceed $62 billion if it were not for Binance ordering more and more tether to be newly minted? That's another story......
Look out for a forthcoming paper with myself, Etienne Carnaghan and Daniel Heck called "The Role of Binance in Bitcoin Price Transmission" where we compare Binance's price influence with that of the CME. Many thanks to Etienne, a student on Sussex's MSc FinTech, Risk and Investment Analysis, for getting the data, running the code, and generating these beautiful charts.