Price clustering in Bitcoin

•We study the price clustering in Bitcoin.•We find significant evidence of price clustering at round numbers.•However there is no significant pattern in returns after round numbers.•We also show that price and volume have a significant positive relationship with price clustering.•Our analysis supports the negotiation hypothesis of Harris (1991).

Investor and media attention in Bitcoin has increased substantially in recently years, reflected by the incredible surge in news articles and considerable rise in the price of Bitcoin. Given the increased attention, there little is known about the behaviour of Bitcoin prices and therefore we add to the literature by studying price clustering. We find significant evidence of clustering at round numbers, with over 10% of prices ending with 00 decimals compared to other variations but there is no significant pattern of returns after the round number. We also support the negotiation hypothesis of Harris (1991) by showing that price and volume have a significant positive relationship with price clustering at whole numbers.