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Booms, busts and heavy-tails: the story of Bitcoin and cryptocurrency markets?

Fry, John
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Publication Date
2018-10
End of Embargo
Supervisor
Keywords
Bitcoin, Bubbles, Cryptocurrencies, Econophysics, Liquidity risk
Rights
Crown Copyright © 2018 Published by Elsevier B.V. All rights reserved. . Reproduced in accordance with the publisher's self-archiving policy. This manuscript version is made available under the CC-BY-NC-ND 4.0 license.
Peer-Reviewed
Yes
Open Access status
openAccess
Accepted for publication
05/08/2018
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Department
Awarded
Embargo end date
Collections
Management and Law Publications
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Abstract
We develop bespoke rational bubble models for Bitcoin and cryptocurrencies that incorporate both heavy tails and the probability of a complete collapse in asset prices. Empirically, we present robustified evidence of bubbles in Bitcoin and Ethereum. Theoretically, we show that liquidity risks may generate heavy-tails in Bitcoin and cryptocurrency markets. Even in the absence of bubbles dramatic booms and busts can occur. We thus sound a timely note of caution.
URI
http://hdl.handle.net/10454/17568
Version
Accepted manuscript
Citation
Fry J (2018) Booms, busts and heavy-tails: the story of Bitcoin and cryptocurrency markets? Economics Letters. 171: 225-229.
Link to publisher’s version
Link to published version
Link to Version of Record
https://doi.org/10.1016/j.econlet.2018.08.008
Type
Article
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Notes