How Persistent and Dependent are Pricing of Bitcoin to other Cryptocurrencies Before and After 2017/18 Crash?

Yaya, OlaOluwa S and Ogbonna, Ephraim A and Olubusoye, Olusanya E (2018): How Persistent and Dependent are Pricing of Bitcoin to other Cryptocurrencies Before and After 2017/18 Crash?

Abstract

The present paper investigates persistence and dependence of Bitcoin on other popular alternative coins. We employ fractional integration approach in our analysis of persistence while a more recent fractional cointegration technique in VAR set-up, proposed by Johansen and co-authors is used to investigate dependency of the paired variables. Having segregated the series into periods before crash and those after the crash as determined by Bitcoin pricing, we obtain results of interests. Higher persistence of shocks is expected after the crash due to speculations in the mind of cryptocurrency traders, and more evidences of non-mean reversions, implying chances of further price fall in cryptocurrencies. Cointegration analysis between Bitcoin and alternative coin exists during both periods, with weak correlation observed mostly in the post-crash period. We hope the findings will serve as guide to investors in cryptocurrency.

• Item Type: MPRA Paper
• Language: English
• Keywords: Cointegration; Cryptocurrency; Fractional integration; Fractional cointegration; Vector autoregression
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes

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