On the Efficiency and Its Drivers in the Cryptocurrency Market: The Case of Bitcoin and Ethereum

Khaled Mokni (), Ghassen El Montasser, Ahdi Noomen Ajmi and Elie Bouri ()
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Khaled Mokni: Université Internationale de Rabat
Ghassen El Montasser: ESCT School of Tunis, University of Manouba
Ahdi Noomen Ajmi: ESCT School of Tunis, University of Manouba
Elie Bouri: Lebanese American University

A chapter in Blockchain, Crypto Assets, and Financial Innovation, 2025, pp 162-191 from Springer

Abstract: Abstract Most previous studies on the market efficiency of cryptocurrencies consider time evolution but do not provide insights into the potential driving factors. This study addresses this limitation by examining the time-varying efficiency of the two largest cryptocurrencies, Bitcoin and Ethereum, and the factors that drive efficiency. It uses daily data from August 7, 2016, to February 15, 2023, the adjusted market inefficiency magnitude (AMIMs) measure, and quantile regression. The results show evidence of time variation in the levels of market (in)efficiency for Bitcoin and Ethereum. Interestingly, the quantile regressions indicate that global financial stress negatively affects the AMIMs measures across all quantiles. Notably, cryptocurrency liquidity positively and significantly affects AMIMs irrespective of the level of (in) efficiency, whereas the positive effect of money flow is significant when the markets of both cryptocurrencies are efficient. Finally, the COVID-19 pandemic positively and significantly affected cryptocurrency market inefficiencies across most quantiles.

Keywords: Bitcoin; Ethereum; Time-varying efficiency; AMIMs; Quantile regression; Drivers of efficiency; C58; G14 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-981-96-6839-7_6

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DOI: 10.1007/978-981-96-6839-7_6

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