Is cryptocurrency Efficient? A High-Frequency Asymmetric Multifractality Analysis

Kai Meng () and Khalid Khan ()
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Kai Meng: Shandong Research Institute of Industrial Technology
Khalid Khan: Qilu University of Technology

Computational Economics, 2024, vol. 63, issue 6, No 5, 2225-2246

Abstract: Abstract Cryptocurrency is the most advanced technology and financial product and the focus of attention of investors pursuing safe-haven assets. This study evaluates the asymmetric multifractality of the cryptocurrencies in the different phases of the coronavirus disease (COVID-19) through a novel approach of asymmetric multifractality detrended fluctuation analysis. The study is a valuable contribution by analyzing the multifractality in the downward and upward price movements. The outcomes show that the major cryptocurrencies have multifractals, which increase as the fractal scale increases. The higher multifractality is observed in the downward (upward) movements for Bitcoin and Ripple, suggesting that both are less efficient and weaker safe havens against unpredictability during the pandemic and throughout the period. The multifractality is greater in the upside (downside) for Ethereum and the market efficiency improves during the pandemic and the full period, as indicated by the greater upward deviation than the downward. The results explore that cryptocurrencies are inefficient during the pandemic. Ethereum requires special attention to monitor such sudden changes in the price dynamic and regulations are extremely critical. This will help investors to develop portfolios to minimize risk and forecast future price trends.

Keywords: Cryptocurrency; COVID-19; Bitcoin; Asymmetric multifractality; Efficiency (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s10614-023-10402-6

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