Dynamic interdependence of cryptocurrency markets: An analysis across time and frequency

Saba Qureshi, Muhammad Aftab, Elie Bouri () and Tareq Saeed

Physica A: Statistical Mechanics and its Applications, 2020, vol. 559, issue C

Abstract: The extreme price swings and complexity in cryptocurrency markets drives multifarious research into co-movements, in both time and frequency, among cryptocurrencies. In this paper, we investigate the dynamics of multiscale interdependencies among five leading and liquid cryptocurrencies (Bitcoin, Ethereum, Ripple, Litecoin, and Bitcoin Cash) using wavelet-based analyses that account for the heterogeneous behaviour of crypto-traders and crypto-investors. The results provide evidence of high levels of dependency from 2016 to 2018 at daily frequency scales. The cross wavelet transforms demonstrate Ripple and Ethereum to be trivial origins of market contagion. The results of wavelet coherence confirm the short-run and long-run market integration among some cryptocurrency pairs. However, the coherence is found to fluctuate at higher frequencies and be significantly stable at lower frequencies. Furthermore, the switch in the lead and lag relations of cryptocurrency returns suggests alternating time and frequency interdependencies. Our findings are useful to scale-conscious traders and multi-prospect (various investment horizon) investors and portfolio managers.

Keywords: Cryptocurrencies; Wavelet analysis; Interdependencies; Market integration; Contagion (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (33)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:phsmap:v:559:y:2020:i:c:s0378437120305641

DOI: 10.1016/j.physa.2020.125077

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