How Cryptocurrency Exchange Interruptions Create Arbitrage Opportunities

Centralized cryptocurrency exchanges offer users a more convenient platform to trade their digital assets at the cost of reduced control. As a result, when these exchanges suffer interruptions users struggle to access their funds or modify their orders. We investigate 41 events at the popular exchange Bitfinex, and measure the impact these events have on trades, volume, and pricing. We find that the volume to trade ratio increases during events, as fewer traders are moving large amounts of bitcoin. We also find that these interruptions often occur at the same time as arbitrage opportunities, with substantial profit opportunities.