Tiniç, M.Şensoy, AhmetAkyıldırım, ErdinçCorbet, S.2024-03-122024-03-122023-01-110270-2592https://hdl.handle.net/11693/114594In 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.enCC BYhttps://creativecommons.org/licenses/by/4.0/Article10.1111/jfir.123171475-6803