The information content of delayed block trades in cryptocurrency markets

This paper examines the price impact of large block trades in cryptocurrency markets by using a natural experiment in Bitcoin provided by the Gemini exchange. The exchange introduced a block trading facility in 2018, but in December 2019, it changed the minimum size threshold that allows market participants to trade a block and report it with a delay. Consistent with theoretical predictions and earlier empirical findings, we largely confirm that the information content of large trades is significantly lower in the upstairs market than in the downstairs. In contrast with prior research in traditional markets, we find that delaying the reporting of a block traded away from the continuous book discourages informed trading and potentially decreases the informativeness of trading and, therefore, information efficiency. Further, we find that the newly implemented size requirement for upstairs trades increases the total market impact, thereby not working as the intended introduction of a block trading facility.