Market efficiency assessment for multiple exchanges of cryptocurrencies

Orlando Telles Souza and João Vinícius França Carvalho

Revista de Gestão, 2023, vol. 31, issue 2, 137-151

Abstract: Purpose - This study aims to analyze the efficient market hypothesis (EMH) of cryptocurrencies on multiple platforms by observing whether there is a discrepancy in the levels of efficiency between different exchanges. Additionally, EMH is tested in a multivariate way: whether the prices of the same cryptocurrencies traded on different exchanges are temporally related to each other. ADF and KPSS tests, whereas the vector autoregression model of order p – VAR(p) – for multivariate system. Findings - Both Bitcoin and Ethereum show efficiency in the weak form on the main platforms in each market alone. However, when estimating a VAR(p) between prices among exchanges, there was evidence of Granger causality between cryptocurrencies in all exchanges, suggesting that EMH is not adequate due to cross information. Practical implications - It is essential to assess the cryptocurrency market in a multivariate way, not only to favor its maturation process, but also to promote a broad understanding of its inherent risks. Thus, it will be possible to develop financial products that are actively managed in a more sophisticated cryptocurrency market. Social implications - There is a possibility of performing arbitrage on different exchanges and market assets through cross-exchanges. Thus, emphasizing the need for regulation of exchanges in the digital asset market, as an eventual price manipulation on a single platform can impact others, which generates various distortions. Originality/value - This study is the first to find evidence of cross-information for the same (and other) cryptocurrencies among different exchanges.

Keywords: Cryptocurrencies; Efficient market hypothesis; Vector autoregression (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eme:regepp:rege-05-2022-0070

DOI: 10.1108/REGE-05-2022-0070

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