Research On The Impact Of Order Imbalance On Price And Trading Strategies In Bitcoin Market

Price discovery is one of the basic functions of the market,and the realization of this function involves the complex process of trading rules,trading mechanisms,market multi-party entities and their interaction.Studying the formation and discovery of asset prices from a market micro perspective has become a feasible way to reveal the "black box process" of price formation on the market.For the bitcoin market where trading asset prices are highly uncertain,the above research path appears to be more valuable Under the high volatility of market target value,it is of practical significance to study the price formation and discovery process from a micro perspectiveBased on the order book research in the study of the microstructure of traditional financial markets,using the UHF data of the world’s largest digital currency exchange’s major transactions and the order book snapshots,this paper conduct an empirical study on the imbalance of the order book and its impact on price formation.The conclusion of the study shows that the order imbalance is related to the market trend tracking behavior.This trend tracking has obvious direction differences.The order imbalance has a positive effect on price changes.The combination of various order imbalance indicators can explain 45%of the price.Change(higher than the 15%-30%level in traditional market research).Based on the price predictive power of order imbalance,this paper builds two types of quantitative trading strategies based on simple signals and machine learning models.The out-of-sample back test results show that the strategy can achieve stable profitability and the strategy retracement can be controlled at a small The scope of risk and return performance is generally betterWith the rapid development of the bitcoin market,research on the micro-level of the bitcoin market will help reveal the market’s price formation process.The research content of this article expands the research object field of the market microstructure and fills the related research gaps of the digital currency market.At the same time,the research results of this paper have important reference significance for the high-frequency trading and quantitative strategy construction of the Bitcoin market investment community.