Multifractal Cross-Correlations of Bitcoin and Ether Trading Characteristics in the Post-COVID-19 Time

Wątorek, Marcin; Kwapień, Jarosław; Dróżdż, S.

doi:10.3390/fi14070215

Cited by 15 publications

(5 citation statements)

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“…Consistently, multifractal properties have been observed in the cryptocurrency market returns and inter-transaction times for different assets [6,18,[33][34][35][36][37][38][39]. Apart from univariate multiscaling, its bivariate version has also been reported between log-returns for different cryptocurrencies: BTC and ETH [40].…”

Section: Introductionmentioning

confidence: 55%

What Is Mature and What Is Still Emerging in the Cryptocurrency Market?

Dróżdż

Kwapień

Wątorek

2023

Entropy

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In relation to the traditional financial markets, the cryptocurrency market is a recent invention and the trading dynamics of all its components are readily recorded and stored. This fact opens up a unique opportunity to follow the multidimensional trajectory of its development since inception up to the present time. Several main characteristics commonly recognized as financial stylized facts of mature markets were quantitatively studied here. In particular, it is shown that the return distributions, volatility clustering effects, and even temporal multifractal correlations for a few highest-capitalization cryptocurrencies largely follow those of the well-established financial markets. The smaller cryptocurrencies are somewhat deficient in this regard, however. They are also not as highly cross-correlated among themselves and with other financial markets as the large cryptocurrencies. Quite generally, the volume V impact on price changes R appears to be much stronger on the cryptocurrency market than in the mature stock markets, and scales as R(V)∼Vα with α≳1.

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Section: Introductionmentioning

confidence: 55%

What Is Mature and What Is Still Emerging in the Cryptocurrency Market?

Dróżdż

Kwapień

Wątorek

2023

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“…The properties of the cryptocurrency price return time series are now close to those observed in mature financial markets such as Forex [11]. However, it has long been believed that the cryptocurrency market, which itself is strongly correlated [12][13][14][15][16][17][18], especially during the COVID-19 period [19][20][21][22][23], has dynamics that is separate from the traditional financial markets [24][25][26][27][28] and that bitcoin can even serve as a hedge or safe haven [29,30] with respect to the stock market, Forex or the commodity market. The hedging potential of bitcoin was even compared to gold [31][32][33][34][35].…”

Section: Introductionmentioning

confidence: 71%

Cryptocurrencies Are Becoming Part of the World Global Financial Market

Wątorek

Kwapień

Dróżdż

2023

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In this study the cross-correlations between the cryptocurrency market represented by the two most liquid and highest-capitalized cryptocurrencies: bitcoin and ethereum, on the one side, and the instruments representing the traditional financial markets: stock indices, Forex, commodities, on the other side, are measured in the period: January 2020–October 2022. Our purpose is to address the question whether the cryptocurrency market still preserves its autonomy with respect to the traditional financial markets or it has already aligned with them in expense of its independence. We are motivated by the fact that some previous related studies gave mixed results. By calculating the q-dependent detrended cross-correlation coefficient based on the high frequency 10 s data in the rolling window, the dependence on various time scales, different fluctuation magnitudes, and different market periods are examined. There is a strong indication that the dynamics of the bitcoin and ethereum price changes since the March 2020 COVID-19 panic is no longer independent. Instead, it is related to the dynamics of the traditional financial markets, which is especially evident now in 2022, when the bitcoin and ethereum coupling to the US tech stocks is observed during the market bear phase. It is also worth emphasizing that the cryptocurrencies have begun to react to the economic data such as the Consumer Price Index readings in a similar way as traditional instruments. Such a spontaneous coupling of the so far independent degrees of freedom can be interpreted as a kind of phase transition that resembles the collective phenomena typical for the complex systems. Our results indicate that the cryptocurrencies cannot be considered as a safe haven for the financial investments.

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“…One of the reasons for this is that most past research focused almost exclusively on BTC, or at most, on the four or five most important cryptocurrencies [74]. Samples of the main cryptocurrencies were used in most studies that focused on contagion, interdependence, or integration in cryptocurrency markets (e.g., [75]). Most of these studies evaluated the relationships between those cryptocurrencies and BTC.…”

Section: Brief Literature Reviewmentioning

confidence: 99%

Impact of the COVID-19 Pandemic on Cryptocurrency Markets: A DCCA Analysis

Almeida

Dionísio

Ferreira

et al. 2023

FinTech

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Extraordinary events, regardless of their financial or non-financial nature, are a great challenge for financial stability. This study examines the impact of one such occurrence—the COVID-19 pandemic—on cryptocurrency markets. A detrended cross-correlation analysis was performed to evaluate how the links between 16 cryptocurrencies were changed by this event. Cross-correlation coefficients that were calculated before and after the onset of the pandemic were compared, and the statistical significance of their variation was assessed. The analysis results show that the markets of the assessed cryptocurrencies became more integrated. There is also evidence to suggest that the pandemic crisis promoted contagion, mainly across short timescales (with a few exceptions of non-contagion across long timescales). We conclude that, in spite of the distinct characteristics of cryptocurrencies, those in our sample offered no protection against the financial turbulence provoked by the COVID-19 pandemic, and thus, our study provided yet another example of ‘correlations breakdown’ in times of crisis.

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Multifractal Cross-Correlations of Bitcoin and Ether Trading Characteristics in the Post-COVID-19 Time

Cited by 15 publications

References 60 publications

What Is Mature and What Is Still Emerging in the Cryptocurrency Market?

What Is Mature and What Is Still Emerging in the Cryptocurrency Market?

Cryptocurrencies Are Becoming Part of the World Global Financial Market

Impact of the COVID-19 Pandemic on Cryptocurrency Markets: A DCCA Analysis

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