An Analysis of Order Book Depth on the Kraken Exchange

Welcome to a 3-piece series on the Kraken exchange. In this study, we’re going to examine order book depth for every trading pair available on Kraken. The other two studies will feature an analysis of bid-ask spreads and slippage.

This study was created by HodlBot — the world’s smartest cryptocurrency trading bot. HodlBot helps cryptocurrency investors automate portfolio creation, indexing, and rebalancing. HodlBot is currently available to users on Binance, Kraken, Bittrex, and KuCoin. It’s free for all accounts under $500.

Kraken logo

Kraken is a cryptocurrency exchange that offers fiat to cryptocurrency trading. It has grown considerably since its re-branding in 2019.

While Kraken does not rank as the top exchanges by reported trade volume, it does rank as one of the most visited exchanges in the world.

Top exchanges by real volume

Blockchain transparency institute ranks Kraken as the 5th highest exchange by real trading volume

Savvy traders know that reported trading volume numbers are unreliable and suspect. Most cryptocurrency exchanges pretend to have higher volume than they actually do. Higher trading volume typically means higher liquidity and more favorable prices. Exchanges that don’t have liquidity sometimes pretend that they do.

Order books are the other hand, don’t lie.

What is an Order Book?

Order books are a collection of offers to sell (asks) and offers to buy (bids). Order books form a valley of bids and asks around the market price.

Kraken order book chart

Kraken's order book for BTC/EUR

The integrity of an order book is enforced by the ever-looming threat of traders executing an order against it.

Fake volume is really obvious to spot. Typically, there is a linear relationship between order book depth and trading volume. If the trading pairs on Kraken don’t follow this rule, then we should be suspicious.

In this article, we’ll analyze the order book depth for every trading pair on Kraken to see how deep, or shallow, it goes.

Measuring Order Book Depth

Data Source:

  • Order books fetched hourly from the Kraken API
  • 10 days of order book data (August 31 to September 9)
  • Trade volume data from Kraken API (august 31 to September 9)

Asks in the order book go up in price the further down you go. They look something like this:


Asks [price, amount] —the lowest price the seller will take

On the other hand, bids in the order book, descend in price like:


Bids [price, amount] — the highest price a buyer will pay

One way to to calculate the order book depth is by simply multiplying the price of asks/bids by the order amount at every price level, then summing it all up together.

This naive way of measuring order book depth places an equal amount of weight on bids and asks that are far away from the market price, compared to bids and asks that are close to the market price.

A More Sophisticated Measure of Order Book Depth

Since prices tend to be exaggerated at the tails, depth tends to be ballooned by extreme prices at both ends, prices that are not likely to be met.

In order to account for this, we can apply a decay to prices the further they are away from the market price.

The weighting formula we’ll use is as follows:

weighting formula order book depth sum

Pd is simply the percentage difference between the two prices.

Naive Measure vs. Adjusted Measure

The adjusted method captures a smaller measurement than the naive approach. For the remainder of the article, whenever we reference order book depth we’ll be using the adjusted measure.

Kraken order book depth two different measurement techniques for qtum/eur mean order book depth kraken

If we take a look at the distribution of mean order book depths of every single trading pair on Kraken, we’ll see that the distribution forms a bi-modal distribution. The first clump is comprised of trading pairs that have very limited volume, and therefore very shallow order books. The rest of them look to be fairly normally distributed.

Order Book Visualizations

Order Book Depth Comparison Between 2 Trading Pairs

kraken order book 2 pairs qtum/eur vs. btc/usd

Plotting the density of 240 observations of order book depth for each of the two trading pairs.

Here’s what the distribution of order book depth looks like for the rank #1 trading pair vs. #50. As we would expect, the more voluminous trading pair is shifted over to the right.

Kraken summary statistics for order book depth qtum/eur vs. btc/usd

Summary statistics

You can find summary statistics for the order book depth for every trading pair in the Google Drive link here.

Order Book Volume vs. Transaction Volume

Kraken order book depth trading volume regression

A linear regression shows that there is a fairly strong relationship between order book depth and trading volume. There are some outliers, but on average, you should expect a greater order book depth on pairs with greater trading volume.

Seeing this relationship gives me more confidence that Kraken is not reporting fake trading volume unbacked by the order book. At the very least, Kraken is not faking trading volume in an obvious way.

In a subsequent article, we’ll dive deeper to investigate trading volume fraud by comparing order book depth vs. volume across multiple exchanges.

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About the Author

Anthony Xie Founder of HodlBot

Written by Anthony Xie

I’m the founder of HodlBot.

I’m a big data nerd. I like to talk about all things data, finance, and crypto. You can find me on Twitter here.