The isotropy of cryptocurrency volatility

Aiman Hairudin and Azhar Mohamad

International Journal of Finance & Economics, 2024, vol. 29, issue 3, 3779-3810

Abstract: We examine the fractal volatility and long‐range dependence of Bitcoin, Ethereum, Tether and USD Coin by employing the continuous wavelet transform, maximal overlap discrete wavelet transform and rescaled range. Our dataset consists of daily prices spanning from January 2017 through to October 2022, encapsulating pre‐ and post‐epidemic eras. Generally, our findings suggest that Tether presents the least overall volatility throughout the time‐frequency spectrum. USD Coin demonstrates ephemeral turbulence, contrary to Tether's maturity in influencing market equilibrium through token issuance and trade responses. In the post‐epidemic sample, both stablecoins indicate mean reversion, with USD Coin showing marginally better efficiency. Conversely, investment tokens display persistent clusters due to retail traders and long‐term fundamental institutions. Although both tokens illustrate multifractal volatility, Ethereum unveils more essence of self‐similarity than Bitcoin. Hence, there is no evidence that Ethereum truly duplicates Bitcoin since policy‐related events differ between them, as both return series move incongruously. Conditional dynamics signify that all cryptocurrencies, except Tether, were affected by the pandemic transition of COVID‐19 and subsequent macroeconomic news. The unconditional volatility of stablecoins evinces zero‐mean errors, antithetical to investment tokens exhibiting annual cycles. The fractal geometry suggests that investment tokens simulate one‐dimensional lines, whereas stablecoins mimic two‐dimensional planes.

Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/ijfe.2857

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:ijfiec:v:29:y:2024:i:3:p:3779-3810

Ordering information: This journal article can be ordered from
http://jws-edcv.wile ... PRINT_ISSN=1076-9307

Access Statistics for this article

International Journal of Finance & Economics is currently edited by Mark P. Taylor, Keith Cuthbertson and Michael P. Dooley

More articles in International Journal of Finance & Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().