EconPapers    
Economics at your fingertips  
 

Chaos and Order in the Bitcoin Market

Josselin Garnier and Knut Solna

Papers from arXiv.org

Abstract: The bitcoin price has surged in recent years and it has also exhibited phases of rapid decay. In this paper we address the question to what extent this novel cryptocurrency market can be viewed as a classic or semi-efficient market. Novel and robust tools for estimation of multi-fractal properties are used to show that the bitcoin price exhibits a very interesting multi-scale correlation structure. This structure can be described by a power-law behavior of the variances of the returns as functions of time increments and it can be characterized by two parameters, the volatility and the Hurst exponent. These power-law parameters, however, vary in time. A new notion of generalized Hurst exponent is introduced which allows us to check if the multi-fractal character of the underlying signal is well captured. It is moreover shown how the monitoring of the power-law parameters can be used to identify regime shifts for the bitcoin price. A novel technique for identifying the regimes switches based on a goodness of fit of the local power-law parameters is presented. It automatically detects dates associated with some known events in the bitcoin market place. A very surprising result is moreover that, despite the wild ride of the bitcoin price in recent years and its multi-fractal and non-stationary character, this price has both local power-law behaviors and a very orderly correlation structure when it is observed on its entire period of existence.

New Economics Papers: this item is included in nep-pay
Date: 2018-09, Revised 2019-04
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1809.08403 Latest version (application/pdf)

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:arx:papers:1809.08403

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().

 
Page updated 2019-04-05
Handle: RePEc:arx:papers:1809.08403