On the Quality of Cryptocurrency Markets: Centralized vs. Decentralized Exchanges

We analyze the market quality of centralized crypto exchanges and decentralized blockchain-based venues (DEXs) using a unique and comprehensive data set. Focusing on two fundamental aspects, transaction costs and deviations from the no-arbitrage condition, we estimate the causal effect of gas fees on DEX market quality. We show that these fixed costs impose a significant burden on relatively small trades and cause persistent arbitrage deviations. Conversely, DEXs offer more competitive transacti