Wang Yintian: A Study of Liquidity in the Bitcoin Market

On December 28, "The 1st Digital Finance Frontier Conference in 2021" was held online. The conference was organized by the Tsinghua SEM Digital Financial Assets Research Center and chaired by Professor Luo Mei, director of the center.Wang Yintian, Associate Professor at Tsinghua University, School of Business and Management, School of Finance and Senior Lecturer at the Center for Digital Financial Research, also spoke as "Market Research in the Bitcoin Market."This sentence is designed based on the content of the statement.

First of all, I want to clarify that this is a study on the Bitcoin investment market. There are two key words in this study. One is market illiquidity, the other is price mechanism, pricing mechanism or the effect of option liquidity, market illiquidity or price option price selection.

Recent bitcoin studies consider bitcoin a financial asset, but it is clearly not a financial asset. Although the price mechanism of Bitcoin itself is completely different, the price mechanism of cryptocurrency derivatives differs from the existing ones. Convergence, so we can start there and do some research.

This study attempts to answer three questions about the cryptocurrency options market.

1. How do end users buy and sell information affecting the value of Bitcoin options?

2. Are there many buyers or sellers in the Bitcoin options market?

3. How does the market affect pricing based on high customer base?

Let's see how the market direction of end users (end users) in the stock market affects stock prices. In the case of shares, the end user (end user) must be the buyer and it is the buyer who bears the risk of the traded product. The worse the liquidity, the lower the price and the higher the expected rate of return and the higher the rate of return because the price eventually returns to the actual value. In the case of options, all participants in the trade can be assigned options, unlike offered products, which are only offered by companies, which are contractors.

When a customer goes to the store to buy an option, the manufacturer trades the option and sells it to me, and if I'm the seller and the retailer chooses, I can afford and sell to the manufacturer. Therefore, in the options market there will be no shortage or oversupply in theory, and in practice both buyers and sellers will liquidate.

Many jobs are held by manufacturers and are protected by various methods or strategies. So who determines the value of an option? In practice, it is not easy for manufacturers to defend their jobs at zero cost. How can you pay for waste water or should manufacturers pay a levy while defending their work? It affects the price, an idea that shows how it can affect the option price in the options market.

When the market is illiquid, producers have to sell when he sees more customers and raise the price, which will affect the cost of choice. If there are too many sellers in the market, the buyer, the Manufacturer, will reduce the price, which will reduce the cost of choice. This is the essence of the whole story.

The effect of liquidity on the option market price also depends on the direction of the end user. If the end user is the seller and the manufacturer is the buyer, the lower the price to pay for the non-investment, the less likely it is to occur.

Are there multiple buyers or multiple sellers? This is the question we will examine. There is a wide range of cryptocurrency options research, and the largest options market is now with multiple buyers.

In order to do the research better, several important differences should be defined. One is illiquidity. One way to be skeptical is to question the option. We use relative implied relativity (ERS) to identify the degree of variance in an option's value, which we measure using excess implied volatility (EIV).

Now there are three results.

1. How do manufacturers protect themselves against market risk?In general, despite the large number of buyers and sellers in the market, manufacturers increase their exposure to protect themselves, especially when there are multiple sellers in the market. .

2. Besides expansion, what other ways can they protect themselves?One assumption is that the lower the market, the higher the relative cost (ERS), the lower the cost. Because manufacturers will have to meet more suppliers and reduce costs. A retrospective measurement of the model shows that under adverse circumstances, manufacturers can cut costs when faced with liquidation.

3. As LedgerX allows small traders or single entrants to access the platform on August 1, 2019, a re-examination of the model allows traders not only to perform the packaging business, but also to make the better and more productive business. Mature and mature market. .

In other words, in the over-the-counter (OTC) market, there are a lot of sellers and there is a lot of pressure from the sellers, so many traders are using the payout strategy and the makers are facing difficulties on the part of sellers. On the other hand, the buy-sell expansion, on the other hand, option prices go down, and finally the market can get bigger with the introduction of small traders or traders (sell markets).