On the transaction cost of Bitcoin

Using a unique data on Bitcoin quotes in 16 different currencies, this paper examines the empirical transaction costs of Bitcoin in international transactions. We find that the transaction cost of Bitcoin is lower than that of retail foreign exchange markets. Bitcoin markets have, on average, 2% narrower bid-ask spreads than retail foreign exchange markets and, when the U.S. dollar is converted to other currencies via Bitcoin, the resulting exchange rates are, on average, 5% better than the retail foreign exchange rate. We find that Bitcoin's simpler infrastructure is a source of the cost advantage.