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We analyze trading speed and fragmentation in asset markets. In our model, trading venues make technological investments and compete for investors who choose where and how much to trade. Faster venues charge higher fees and attract speed‐sensitive investors. Competition among venues increases investor participation, trading volume, and allocative efficiency, but entry and fragmentation can be excessive, and speeds are generically inefficient. Regulations that protect transaction prices (e.g., Securities and Exchange Commission trade‐through rule) lead to greater fragmentation. Our model sheds light on the experience of European and U.S. markets since the implementation of Markets in Financial Instruments Directive and Regulation National Markets System.

We address the determination of bitcoin prices and decentralized security. Users forecast the transactional and resale values of holdings, pricing the risk of systemic attacks. Miners contribute resources to protect against attackers and compete for block rewards. Bitcoin’s design leads to multiple equilibria: the same blockchain technology is consistent with sharply different price and security levels. Bitcoin’s monetary policy can lead to welfare losses and deviations from quantity theory. Price-security feedback amplifies fundamental shocks’ volatility impact and leads to boom and busts unconnected to fundamentals. We characterize how viability versus fiat currency depends on bitcoin’s relative acceptability and inflation protection.

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