The Pricing and Performance of Cryptocurrency

Paul P. Momtaz

The European Journal of Finance, 2021, vol. 27, issue 4-5, 367-380

Abstract: This paper examines the performance of cryptocurrencies issued in initial coin offerings (ICOs) over a three-year period after the initial exchange listing. Average (median) ICO underpricing amounts to 15% (3%), even though 4 out of 10 ICOs destroy value on the first trading day. Liquidity, market capitalization, and high-low price ratios predict returns. Long-run buy-and-hold returns are positive for the mean and negative for the median. For holding periods between one and twenty-four months, the median ICO depreciates by 30%. Evidently, there is substantial positive skewness in the cryptocurrency market. Further, a size effect emerges from the data as an empirical regularity: Large ICOs are more often overpriced and underperform in the long run.

Date: 2021
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Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:taf:eurjfi:v:27:y:2021:i:4-5:p:367-380

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DOI: 10.1080/1351847X.2019.1647259

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