Liquidity and Market Microstructure of Tokenized Carbon Assets Trading in Blockchain-Based Voluntary Carbon Markets: A Mean-Centered MMRMs with HAC Corrections

This study examines the determinants of liquidity in blockchain-based Voluntary Carbon Markets (VCMs) using three tokenized carbon assets: $KLIMA, BCT, and MCO2. Liquidity is measured by dollar volume, bid-ask spread, and return volatility. Using 1,075 daily on-chain observations from 20 November 2021 to 29 October 2024, we analyze the effects of total supply, transaction activity, market capitalization, transaction frequency, and active wallets. The empirical results reveal substantial heterogeneity across tokens. Dollar volume is jointly driven by token supply, on-chain trading activity, and network participation, particularly for BCT, while $KLIMA and MCO2 liquidity are more sensitive to token supply. Transfer amount and supply dispersion are found to widen bid-ask spreads for BCT. While market capitalization is the main determinant for $KLIMA and MCO2, indicating elevated transaction costs under fragmented and speculative trading conditions. Return volatility is primarily influenced by transfer amount for $KLIMA and market capitalization for BCT and MCO2, highlighting distinct volatility transmission mechanisms. The variables of shared volume, transaction value, and market capitalization on firm value could be moderated by the regulation index, which is referred to as pure moderation. For the variables of total supply, transfer amount, and active wallet, none of them could be moderated by the regulation index. This study contributes a unique integrative approach to measuring liquidity and market microstructure in VCMs, as no standardized global model or index currently captures both dimensions in tokenized carbon markets while incorporating regulatory conditions.