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Investigating the essential impact of the cryptocurrency market on carbon emissions is significant for the U.S. to realize carbon neutrality. This exploration employs low-frequency vector auto-regression (LF-VAR) and mixed-frequency VAR (MF-VAR) models to capture the complicated interrelationship between cryptocurrency policy uncertainty (CPU) and carbon emission (CE) and to answer the question of whether cryptocurrency policy uncertainty could facilitate U.S. carbon neutrality. By comparison, the MF-VAR model possesses a higher explanatory power than the LF-VAR model;the former's impulse response indicates a negative CPU effect on CE, suggesting that cryptocurrency policy uncertainty is a promoter for the U.S. to realize the goal of carbon neutrality. In turn, CE positively impacts CPU, revealing that mass carbon emissions would raise public and national concerns about the environmental damages caused by cryptocurrency transactions and mining. Furthermore, CPU also has a mediation effect on CE;that is, CPU could affect CE through the oil price (OP). In the context of a more uncertain cryptocurrency market, valuable insights for the U.S. could be offered to realize carbon neutrality by reducing the traditional energy consumption and carbon emissions of cryptocurrency trading and mining.
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Covid-19 salgınının ortaya çıkmasından sonra dünya çapında ekonomik çalkantılar ve şiddetli piyasa düşüşlerinin ortaya çıktığı görülmüştür. Bu dönemde hisse senedi piyasalarına yatırım yapmış ajanlar için hedge ve/veya güvenli liman araçları arayışları artmıştır. Kripto paralar ve altın özellikle gelişmekte olan ülke piyasalarındaki yatırımcılar için hedge ve/veya güvenli liman olma konusunda iyi potansiyellere sahiptir. Bu çalışmada, Borsa Ístanbul için Bitcoin, Etherium, Ripple, Litecoin ve altın piyasalarının hedge ve/veya güvenli liman piyasalar olup olmadığı, GARCH(1,1) hata terimleri varsayımı altında modellenmiş regresyon sistemi yardımı ile araştırılmıştır. Analizlerde örneklem olarak 4 Eylül 2017 – 30 Mart 2022 tarihleri arasındaki günlük frekanslı verilerden faydalanılmıştır. Ayrıca, Covid-19 salgın dönemi etkilerini ayrıştırmak için örneklem iki alt gruba ayrılmış ve tahminler Covid-19 öncesi dönem (31 Aralık 2019 öncesi) ve Covid-19 dönemi (31 Aralık 2019 ve sonrası) için ayrı ayrı analiz edilmiştir.A.B.D. doları cinsinden elde edilmiş kripto para (BTC, ETH, XRP, LTC), altın ve BÍST100 endeks getirileri kullanılarak bulunan tahmin sonuçlarına göre, tüm örneklem için Litecoin zayıf güvenli liman olarak ortaya çıkarken, Covid-19 öncesi dönemde Bitcoin ve Etherium zayıf hedge, Covid-19 salgın döneminde de Etherium zayıf güvenli liman olma özellikleri göstermektedir. Tüm örneklem ve salgın öncesi dönem verileri söz konusu olduğunda, BÍST100 endeks getiri dağılımının %10 çeyrek değerinden az olduğu durumlarda Bitcoin, Etherium ve Ripple güvenli liman piyasalar olarak gözlemlenirken, salgın döneminde altın, BÍST100 endeks getiri dağılımının %1 çeyrek değerinden az olduğu durumlarda güvenli bir liman olarak ortaya çıkmıştır. Fakat tüm analizlere dayanarak, altının genel görünümüyle BÍST100 endeksi için hedge veya güvenli limandan çok bir çeşitlendirici varlık olarak öne çıktığı söylenebilir.Alternate :After the Covid-19 outbreak, economic turmoil and severe market crashes have been observed around the world. During this crisis period, cyriptocurrencies and gold have become potentially good hedge and/or safe haven assets for especially the stock investors in emerging markets. This study investigates whether or not Bitcoin, Etherium, Ripple, Litecoin and gold markets have hedge and/or safe-haven properties for Borsa Ístanbul through a regression system modeled under the assumption of GARCH(1,1) error terms. Daily frequency data covering the period September 4, 2017 through March 30, 2022 is used in the sample analysis. In addition, to separate out the effects of the Covid-19 pandemic on the analysis, full sample is divided into two subgroups and the estimations are made separately for the pre-Covid-19 period (before 31 December 2019) and the Covid-19 period (31 December 2019 and later).According to the estimation results, Litecoin emerges as a weak safe haven for Borsa Ístanbul over the entire sample period, while Bitcoin and Etherium appear to be weak hedges in the pre-pandemic period. During the Covid-19 pandemic period, Etherium is shown to be a weak safe haven for the BÍST100 index. Full sample and pre-pandemic data analysis reveal that, Bitcoin, Etherium and Ripple act as safe-haven markets in some cases when the BÍST100 index returns hit lower than their 10% quantile value. After the outburst of the Covid-19 however, gold seems to act as a safe haven asset for Borsa Ístanbul when the BÍST100 index returns hit lower than their 1% quantile value. Based on the overall estimation results, gold stands out as a diversifier rather than a hedge and/or a safe haven asset for the BÍST100 index.
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This study investigates the dynamic mechanism across equity, cryptocurrency, and commodity markets before and during health and geopolitical crisis (Covid-19 and the Ukrainian war). We apply the (TVP-VAR) based extended joint connectedness methodology, to understand return and volatility connectedness of financial markets for 2010–2023 period. The empirical results indicate that spillovers were particularly high during the Covid-19 and Russia-Ukraine war. First, health and geopolitical risks considerably impact the return and volatility system. Second, the value of total joint connectedness during the COVID-19 period was greater than during Russia-Ukraine war crisis. Also, evidence suggests that Commodity markets, received the highest shocks from other markets after Russia-Ukraine war and wheat was the main commodity receiving chocks from both health and geopolitical crisis. Our findings indicate that spillover channels differ depending on the type of crisis. Specifically, low-frequency components are the main transmission channels during the health crisis, whereas high-frequency components are the main transmission channels during the geopolitical crisis. Finally, results indicate that, cryptocurrency markets played some minor role in transmitting risks between markets. Our results are important in understanding how assets affect return and volatility spillover during geopolitical and health crises and are of particular importance to policymakers, market regulators, investors, and portfolio managers.
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As governments across the world examine blockchain technology, there are growing concerns about how to implement, enforce and maximize the benefits of the technology. Many countries have to do extensive research and analysis before coming up with proposals. The future of the Emirates Economy is getting less foggy as COVID-19 pushes many government sectors to dip their toes in digital blockchains. It is just a matter of time until blockchain technology is fully implemented in both the public and private sectors. This chapter's purpose is to first understand what is blockchain? Second, to explore blockchain technology in Dubai and third, to describe the sustainable aspects generated by blockchain by looking at different projects implemented in Dubai. The paper summarizes several measures for implementing, promoting and regulating the advancement of blockchain technology taking the example of Dubai. Finance, supply chain, digital identity, energy, healthcare, real estate, transportation and crowdfunding are only a few industries that have well-embraced blockchain technology. This chapter uses an exploratory approach by reviewing past studies and literature reviews on the topic of blockchain in Dubai. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022.
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The paper examines market co-movement between pairs of financial assets in the time-frequency domain. Recent finance literature confirms the integration of cryptocurrencies and financial assets, which may bring more investments with the possibility of surplus liquidity in the cryptocurrency segment, leading to financial instability. The novelty of this paper is examining the integration of cryptocurrencies and the indices of equity, sustainability, renewable energy, and crude oil for the daily observations from 2015 to 2021 by using the wavelet coherency method. The empirical results signify no integration in the short-term scales and grow stronger in the medium-term scales, especially during the COVID-19 period, and further exhibit weaker heterogeneous associations in the long-term scales. However, the sustainability, clean energy indices follow similar dynamics of the equity market and crypto pairs. In contrast, the global crude oil index showcases the minor integration with cryptocurrencies compared with other traditional asset classes. Hence, the cryptocurrency market fails to confirm the safe haven features, especially during the COVID-19 periods (Medium-term), which facilitate the domestic and international investors expecting to hedge their price risk in equity markets using cryptocurrencies may have to look for short-term. The lead-lag heterogeneous effects of the asset-pairs may pave arbitrage opportunities for investors.
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PurposeThe COVID-19 pandemic has led to global economic policy uncertainty, which has increased the need to investigate ways to mitigate the uncertainty. This study aims to examine the potential of cryptocurrencies as a hedge and safe haven avenue against economic policy uncertainty.Design/methodology/approachThis study investigates the behavior of the five leading cryptocurrencies in relation to country-level and group-level economic policy uncertainty indices, as measured by the text-based method developed by Baker et al. (The Quarterly Journal of Economics, 2016, 131, 1593-1636). The research covers a broad range of emerging and developed economies from July 2013 to September 2020. The study employs the approach of Narayan et al. (Economic Modelling, 2016, 53, 388-397) to examine the hedging and safe-haven properties of cryptocurrencies.FindingsThis study finds that the top cryptocurrencies play a hedging role against economic policy uncertainty, with some exceptions. Additionally, there is evidence to support the idea that cryptocurrencies can serve as a safe haven during the COVID-19 pandemic. As a result, investors may benefit from using cryptocurrencies as a risk-management avenue during times of uncertainty.Originality/valueThis research contributes to the existing literature by testing the cryptocurrencies' hedging and safe haven properties in a new way, by analyzing their lead and lag behaviors using a recent and innovative approach. Additionally, it examines a wide range of emerging and advanced markets, providing insight into the potential of using cryptocurrencies as a risk mitigation avenue.
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This paper adopts an interactive network approach to investigate the factors driving the carbon footprint of Bitcoin, a negative aspect of cryptocurrencies. Our findings demonstrate that the dynamics of Bitcoin prices, including both returns and volatility, have a significant impact on the system comprising carbon emissions, energy prices, carbon prices, and financial indicators. Particularly during the first two years of the COVID-19 pandemic period, the spillover effects are observed to be particularly strong. Furthermore, we find that the dynamics of Bitcoin prices play a crucial role in driving its associated carbon emissions.
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This paper aims to investigate the impact of global financial, economic, and gold price uncertainty indices (VIX, EPU, and GVZ) and investor sentiment based on media coverage news on the returns of Bitcoin and Ethereum during the COVID-19 pandemic. We adopt an asymmetric framework based on the Quantile-on-Quantile approach, which examines the quantiles of the cryptocurrency returns, investor sentiment, and the various uncertainties indicators. The empirical findings suggest that the COVID-19 pandemic has significantly impacted cryptocurrency returns. Specifically, (i) the results demonstrate the predictive power of Economic Policy Uncertainty (EPU) during this period, as evidenced by a strong negative association between EPU and cryptocurrency returns across all quantiles; (ii) the correlation between cryptocurrency returns and the VIX index was negative but weak, across various quantile combinations of Ethereum and Bitcoin returns; (iii) an increase in COVID-19 news negatively affected Bitcoin returns across all quantiles; (iv) Bitcoin and Ethereum cannot be relied upon as effective hedging tools against global financial and economic uncertainty during the COVID-19 pandemic. Studying the behavior of cryptocurrency during uncertainty like pandemics is extremely important because it provides investors with insights on diversifying their portfolios and hedging their risks.
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The economic downturn caused by the Covid-19 pandemic has brought unprecedented uncertainty to the global banking system. Banks are facing critical market challenges driven by uncertain monetary policies, deterioration in credit quality, and regulation and compliance pressures. These challenges highlight the importance of better understanding the new role of financial intermediations in facilitating efficient capital allocations and economic development. This article reviews the related literature on monetary policy uncertainty, bank performance, digital finance, and introduces articles on these themes. Finally, we propose potential areas for future research. © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
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Purpose: This study aims to utilize the bibliometric method to investigate the most important characteristics and key research topics in the literature on cryptocurrency research. Theoretical framework: This study used a text mining framework based on domain-level and knowledge structure analysis. Design/methodology/approach: Based on domain-level and knowledge structure analysis, this study used data from the Scopus database, which included 1,685 published articles from 2018 to 2023 on cryptocurrency research. Data analytics and visualization may be accomplished with the bibliometrix package in R software. Findings: The result found that, there has been a fifty percent annual growth in cryptocurrency research since 2018. Studying the most frequently used terms and phrases in the research makes it possible to see which research areas have the greatest impact. According to the results, (1) cryptocurrency market, (2) market efficiency, (3) herding behavior, (4) COVID pandemic, (5) safe haven, (6) stock markets, (7) financial markets, and (8) volatility spillovers should be the emphasis of future research. Research, Practical & Social implications: This article will be useful to scholars and practitioners looking for research directions. Based on the trending topics and knowledge structure of cryptocurrency research, this research also suggests potential new study topics for the future. Originality/value: The value of these findings revealed an increase and a new aspect of cryptocurrency research in the business field related to the continued expansion of empirical research documents, researchers/authors, global collaboration, and co-citations. © 2023 AOS-Estratagia and Inovacao. All rights reserved.
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This study provides an empirical analysis on the main univariate and multivariate stylized facts iin return series of the two of the largest cryptocurrencies, namely Ethereum and Bitcoin. A Markov-Switching Vector AutoRegression model is considered to further explore the dynamic relationships between cryptocurrencies and other financial assets. We estimate the presence of volatility clustering, a rapid decay of the autocorrelation function, an excess of kurtosis and multivariate little cross-correlation across the series, except for contemporaneous returns. The analysis covers the pandemic period and sheds lights on the behaviour of cryptocurrencies under unexpected extreme events.
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Purpose: This study aims to identify the ability of gold and cryptocurrency (Cryptocurrency Uncertainty Index (UCRY) Price) as safe haven assets (SHA) for stocks and bonds in both conventional (i.e. stock indices and government bonds) and Islamic markets (i.e. Islamic stock indices and Islamic bonds (IB)). Design/methodology/approach: The authors employed the nonadditive panel quantile regression model by Powell (2016). It measured the safe haven characteristics of gold and UCRY Price for stock indices, government bonds, Islamic stocks, and IB under gold circumstances and level of cryptocurrency uncertainty, respectively. The period spanned from 11 March 2020 to 31 December 2021. Findings: This study discovered three findings, including: (1) gold is a strong safe haven for stocks and bonds in conventional and Islamic markets under bearish conditions;(2) UCRY Price is a strong safe haven for conventional stocks and bonds but only a weak safe haven for Islamic stocks under high crypto uncertainty;and (3) gold offers a safe haven in both emerging and developed countries, while UCRY Price provides a better safe haven in developed than in emerging countries. Practical implications: Gold always wins big for safe haven properties during unstable economy. It can also win over investors who consider shariah compliant products. Therefore, it should be included in an investor's portfolio. Meanwhile, cryptocurrencies are more common for developed countries. Thus, the governments and regulators of emerging countries need to provide more guidance around cryptocurrency so that the societies have better literacy. On top of that, the investors can consider crypto to mitigate risks but with limited safe haven functions. Originality/value: The originality aspects of this study include: (1) four chosen assets from conventional and Islamic markets altogether (i.e. stock indices, government bonds, Islamic stock indices and IB);(2) indicator countries selected based on the most used and owned cryptocurrencies for the SHA study;and (3) the utilization of UCRY Price as a crypto indicator and a further examination of the SHA study toward four financial assets. © 2023, Michaelia Widjaja, Gaby and Shinta Amalina Hazrati Havidz.
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The pandemic and subsequent changes in various spheres of human activity have also transformed consumer behavior, particularly in the cryptocurrency market. The article is aimed at identifying the priority directions of transformations taking place in the cryp-tocurrency market in the conditions of the Covid-19 pandemic under the influence of certain groups of factors. System and network approaches to understanding the cryp-tocurrency market have been identified. The cryptocurrency market is considered from a functional and institutional point of view. From a functional point of view, the crypto-currency market is a set of economic relations in cyberspace regarding cryptocurrency mining, initial coin offering (ICO) and circulation of cryptocurrencies based on the laws of supply and demand. From an institutional point of view, the cryptocurrency market is a set of participants in virtual currency schemes who carry out cryptocurrency trans-actions. The following signs of cryptocurrency market segmentation are justified such as those depending on the market capitalization of the cryptocurrency;on the nature of the crypto asset's movement;on operations carried out on the market;on the region;on consumers of services. Factors that influence the functioning of the cryptocurrency market are systematized according to the following groups: macroeconomic, price, en-vironmental, geographic, market, behavioral and technological. The influence of gold, oil prices, the daily number of Covid-19 cases and deaths from Covid-19, the MSCI ACWI global stock index, the iShares MSCI All Country Asia ex Japan ETF, the Wilshire 5000 Total Market Index on the Bitcoin exchange rate is revealed. The trends in the crypto-currency market development in the post-war period are justified, namely the growth of investors' interest in cryptocurrencies against the background of the initial coin offer-ing collapse;growth of payments in cryptocurrencies;strengthening the regulatory landscape on a global and national scale;integration of the cryptocurrency market with traditional finance;attracting non-typical participants to the cryptocurrency business;expansion of participants in the infrastructure of the cryptocurrency market due to the rapid cryptocurrency market development, in particular, due to the production of equip-ment for its operation.
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PurposeThis paper aims to analyse COVID-19 indices and blockchain features on Bitcoin and Ethereum returns, respectively. The authors focus on the most used and owned cryptocurrencies that cover Europe, the US and Asian countries.Design/methodology/approachAn autoregressive distributed lag panel (pooled mean group and mean group) is utilized, and a robustness check is incorporated by using a Random Effect Model and Generalized Method of Moments (GMM).FindingsFour new findings were discovered, including (1) the vaccine confidence index (VCI) pushes economic recovery and increased demand for the Bitcoin market, but the opposite result was interestingly observed from Ethereum;(2) the blockchain features were revealed to be essential to Bitcoin, while they were irrelevant to Ethereum for short-run country-specific results;(3) the hash rate and network difficulty moved inversely during the pandemic;and (4) the government played a significant role in taking action during uncertain times and regarding cryptocurrency policies.Research limitations/implicationsVCI is constructed by the most used vaccine type in our sample countries (i.e. Pfizer), as the data for a specific classification by each type is still unavailable.Practical implicationsProviding an evenly distributed vaccination program primary vaccination series against COVID-19 to the citizens is an essential duty of the government. Bitcoin policymakers and investors should watch the COVID-19 vaccine distributions closely as it will affect its return. Ethereum is emphasized to keep developing its smart contract which appeared to outplay other blockchain features. Cryptocurrency investors should be wise in their investment decisions by analysing the news thoroughly.Social implicationsThis research emphasizes that the success in the roll-out of COVID-19 vaccination requires citizens' willingness to participate and their trust in the vaccine's efficacy. Such self-awareness and self-discipline in society can ultimately empower individuals and stabilise the economy. Nevertheless, the implementation of health protocols is still highly required to prevent the spread of new variants of COVID-19.Originality/valueThis is the first study that attempts to construct a VCI which denotes the confidence derived from the administration of full-dose COVID-19 vaccines (an initial vaccine and a second vaccine). The authors further find the impact on cryptocurrency returns. Next, blockchain size is utilized as a new determinant of cryptocurrencies.
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The present study conducts a dynamic conditional cross-correlation and time–frequency correlation analyses between cryptocurrency and equity markets in both advanced and emerging economies. The purpose of the study is twofold. First, the study investigates the presence of the pure (narrow) form of financial contagion between cryptocurrency and stock markets in both advanced and emerging economies, during the black swan event of the COVID-19 crisis. Second, the study examines the hedging and safe-haven properties of cryptocurrencies against equity markets, before and during periods of financial upheaval triggered by the COVID-19 pandemic. Two econometric models are used: (1) the dynamic conditional correlation (DCC) GARCH and (2) the wavelet analysis models. Using the DCC GARCH model, the study found the evidence of high conditional correlations between cryptocurrency and equity markets. The high conditional correlation was mostly detected in periods of financial turmoil corresponding to the first quarter and the second quarter of 2020. The increase in conditional correlation during periods of financial upheaval (compared to a tranquil period) indicates the presence of the pure form of financial contagion. The wavelet cross-correlation analysis showed the evidence of positive cross-correlation between the Bitcoin and the equity markets during period of financial turmoil. The cross-correlation was identified in both short and long (coarse) scales. In short scales, the equity markets lead the cryptocurrency market, while the cryptocurrency market leads equity markets in coarse scales. The findings of the present study revealed that the degree of interdependence between cryptocurrency and equity markets has substantially increased during the COVID-19 period, and this has negated the safe-haven and hedging benefits of cryptocurrencies over equity markets. © 2023 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group.
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This chapter attempts to provide a comprehensive overview of the ongoing technological disruption in the finance world. There is no denying that technology has already brought disruption of unprecedented scale and type in terms of bringing innovative solutions like never seen before in the financial sector. The disruptive innovation like P2P lending, Crowdfunding, Cryptocurrency, Regtech, Insurtech mobile payment, etc. has changed the way traditional financial institutions used to operate. Against such a backdrop, this chapter attempts to provide an overview of this disruption. The chapter also explores how these innovations have brought changes in the working cultures among financial institutions. The study suggests, based on the analysis of facts and figures that the disruptive technology has brought positive changes in the society in terms of delivering valuable stimulus and financial aid to the vulnerable and affected by the COVID-19 pandemic. The findings of the study further suggest that the Fintech disruption has been a blessing in disguise for the overall growth and development of the finance community. © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Switzerland AG 2022.
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The cryptocurrency market has been growing rapidly in recent years. The volume of transactions and the number of participants in the cryptocurrency market makes it huge enough that we cannot ignore it. At the same time, the global stock market has also reached a new height in the past two years. However, due to the COVID epidemic and other political and economic-related factors in the last two years, the uncertainty in the capital market remains high, and short-term large fluctuations occur frequently;thus, many investors have suffered substantial losses. Pairs trading, an advanced statistical arbitrage method, is believed to hedge the risk and profit off the market regardless of market condition. Amongst the vast literature on pairs trading, there have been investors trading a pair of cryptocurrencies or a pair of stocks using machine learning or empirical methods. This research probes the boundary of utilizing machine learning methods to do pairs trading with one stock asset and another cryptocurrency. Briefly, we built an assets pool with both stocks and cryptocurrencies to find the best trading pair. In addition, we applied mainstream machine learning models to the trading strategy. We finally evaluated the accuracy of the proposed method in prediction and compared their returns based on the actual U.S. Stock and Cryptocurrency Market data. The test results show that our method outperforms other state-of-the-art methods. © 2022 IEEE.
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Since the emergence of blockchain technology, several digital assets such as cryptocurrencies, DeFi, and NFTs have gained considerable attention from investors and policymakers. However, the blockchain market has significant negative ramifications for the environment that may transmit shocks towards eco-friendly financial assets. We use the rolling window wavelet correlation (RWWC) model and the quantile-based time-varying (QVAR) connectedness framework to analyze the dynamic price correlation and connectedness between the blockchain market and green (eco-friendly) financial assets. As a representative of the blockchain market, we use the price returns of four cryptocurrencies, DeFi, and NFTs. For green equities, we use the MSCI Global Environment Price Index and the S&P Green Bond Price Index. We find a low correlation between the blockchain market and green financial assets before the outbreak of COVID-19 and a strong correlation during the COVID-19 and the Russia-Ukraine war. The quantile VAR results show symmetric connectedness of the examined and identical spillovers between extremely positive and strongly negative returns. Green bonds and stocks are the system's major shock receivers. The transmission network results imply major shock transmissions are driven by short-term frequency, whereas there is a lower transmission in the long-term. © 2023 Elsevier Inc.
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We investigate fat tails and network interconnections of crude oil, gold, stock, and cryptocurrency using seven Bayesian vector heterogeneous autoregression fashions. In this paper, we incorporate parameter uncertainty by using Bayesian VAR models for estimation. To make rational investment decisions, we decompose a network of financial assets and commodity prices into various time horizons to obtain essential insight and knowledge. During the short, medium, and long run, this paper differentiates dynamically between network interlinkages between these markets. We found some noteworthy results in our study. In the first place, network interlinkages exhibit remarkable differences over time. Interlinkages between networks are increased in the short term, medium term, and long term due to transient events occurring in markets during the study period. As a result of the ongoing COVID-19 epidemic, the long-term ties within the system are significantly impacted. Additionally, based on net directional linkages, each market's role shifts (from sending to receiving shock and vice versa) before the pre-COVID-19 pandemic course, whereas they remain persistent during COVID-19. Observations of short- and medium-term trends reveal that three markets, namely, crude oil, gold, and stock, receive shocks, which are transmitted to these markets by the cryptocurrency market. In terms of long-horizon measures, the results indicate that the gold and cryptocurrency markets persist as shock transmitters. Our findings are critical since policymakers can also design appropriate policies to reduce the vulnerabilities of such markets and prevent risk spread and instability.
Subject(s)
COVID-19 , Petroleum , Humans , Gold , Bayes Theorem , Pandemics , Disease OutbreaksABSTRACT
This article sheds new light on the informational efficiency of the cryptocurrency market by analyzing investment strategies based on structural factors related to on-chain data. The study aims to verify whether investors in the cryptocurrency market can outperform passive investment strategies by applying active strategies based on selected fundamental factors. The research uses daily data from 2015 to 2022 for the two major cryptocurrencies: Bitcoin (BTC) and Ethereum (ETH). The study applies statistical tests for differences. The findings indicate informational inefficiency of the BTC and ETH markets. They seem consistent over time and are confirmed during the COVID-19 pandemic. The research shows that the net unrealized profit/loss and percent of addresses in profit indicators are useful in designing active investment strategies in the cryptocurrency market. The factor-based strategies perform consistently better in terms of mean/median returns and Sharpe ratio than the passive "buy-and-hold " strategy. Moreover, the rate of success is close to 100%.