Cryptocurrency Market Activity During Extremely Volatile Periods
33 Pages Posted: 2 Aug 2018
Date Written: May 01, 2018
Using daily data for eight major cryptocurrencies and bivariate extreme value theory (peaks-over-threshold method), this study examines the extreme dependence between returns and trading volumes in the cryptocurrency market. It is shown that, irrespective of the cryptocurrency under consideration, the extreme correlation between return and volume decreases as we move towards the distribution tails, supporting previous claims of cryptocurrencies resembling assets. We also find evidence of asymmetric return-volume relationship in the cryptocurrency market, as a result of discrepancies in the correlation between positive and negative return exceedances across all the cryptocurrencies. Our results have significant implications for better understanding the activity of market participants during extreme events in cryptocurrency markets.
Keywords: Bitcoin, Cryptocurrency, Trading Volume, Return-Volume Dependence, Extreme Returns
JEL Classification: C46, F38, G01, G32
Suggested Citation: Suggested Citation