Tiniç, MuratTinic, MuratSensoy, AhmetAkyildirim, ErdincCorbet, Shaen2023-10-192023-10-19202300270-25921475-6803https://doi.org/10.1111/jfir.12317https://hdl.handle.net/20.500.12469/5613In this article we investigate the influence that information asymmetry may have on future volatility, liquidity, market toxicity, and returns within cryptocurrency markets. We use the adverse-selection component of the effective spread as a proxy for overall information asymmetry. Using order and trade data from the Bitfinex exchange, we first document statistically significant adverse-selection costs for major cryptocurrencies. Also, our results suggest that adverse-selection costs, on average, correspond to 10% of the estimated effective spread, indicating an economically significant impact of adverse-selection risk on transaction costs in cryptocurrency markets. Finally, we document that adverse-selection costs are important predictors of intraday volatility, liquidity, market toxicity, and returns.eninfo:eu-repo/semantics/closedAccessCross-SectionLiquidityAskExchangeComponentsPricesCross-SectionLiquidityAskExchangeComponentsPricesArticle497546246WOS:00091926970000110.1111/jfir.123172-s2.0-85147380548Q3Q2