Complexity traits and synchrony of cryptocurrencies price dynamics

Davide Provenzano () and Rodolfo Baggio
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Davide Provenzano: University of Palermo

Decisions in Economics and Finance, 2021, vol. 44, issue 2, No 20, 955 pages

Abstract: Abstract In this study, we characterized the dynamics and analyzed the degree of synchronization of the time series of daily closing prices and volumes in US$ of three cryptocurrencies, Bitcoin, Ethereum, and Litecoin, over the period September 1,2015–March 31, 2020. Time series were first mapped into a complex network by the horizontal visibility algorithm in order to revel the structure of their temporal characters and dynamics. Then, the synchrony of the time series was investigated to determine the possibility that the cryptocurrencies under study co-bubble simultaneously. Findings reveal similar complex structures for the three virtual currencies in terms of number and internal composition of communities. To the aim of our analysis, such result proves that price and volume dynamics of the cryptocurrencies were characterized by cyclical patterns of similar wavelength and amplitude over the time period considered. Yet, the value of the slope parameter associated with the exponential distributions fitted to the data suggests a higher stability and predictability for Bitcoin and Litecoin than for Ethereum. The study of synchrony between the time series investigated displayed a different degree of synchronization between the three cryptocurrencies before and after a collapse event. These results could be of interest for investors who might prefer to switch from one cryptocurrency to another to exploit the potential opportunities of profit generated by the dynamics of price and volumes in the market of virtual currencies.

Keywords: Cryptocurrency; Time series; Complex network analysis; Synchronization; Bitcoin (search for similar items in EconPapers)
JEL-codes: C32 C6 D53 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (2)

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DOI: 10.1007/s10203-021-00319-w

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