2024/02/06 by Erdong Chen, Chen, Erdong, Mengzhong Ma +3
Economics, Econometrics and Finance · #Complex Systems and Time Series Analysis #FOS: Economics and business #Financial Markets and Investment Strategies #Pricing of Securities (q-fin.PR) #Trading and Market Microstructure (q-fin.TR)
paper · pdf · doi:10.48550/arxiv.2402.03953
openalex publication_date 2024/02/06 · openalex created_date 2024/02/09 · openalex updated_date 2026/07/28
In this paper, we analyze traders' behavior within both centralized exchanges (CEXs) and decentralized exchanges (DEXs), focusing on the volatility of Bitcoin prices and the trading activity of investors engaged in perpetual future contracts. We categorize the architecture of perpetual future exchanges into three distinct models, each exhibiting unique patterns of trader behavior in relation to trading volume, open interest, liquidation, and leverage. Our detailed examination of DEXs, especially those utilizing the Virtual Automated Market Making (VAMM) Model, uncovers a differential impact of open interest on long versus short positions. In exchanges which operate under the Oracle Pricing Model, we find that traders primarily act as price takers, with their trading actions reflecting direct responses to price movements of the underlying assets. Furthermore, our research highlights a significant propensity among less informed traders to overreact to positive news, as demonstrated by an increase in long positions. This study contributes to the understanding of market dynamics in digital asset exchanges, offering insights into the behavioral finance for future innovation of decentralized finance.