Cryptocurrency momentum effect: DFA and MF-DFA analysis

By Qing Cheng, Xinyuan Liu, Xiaowu Zhu. Physica A: Statistical Mechanics and its Applications, 2019

64 citations recorded by the source corpus.

Abstract Cryptocurrency has experienced the skyrocketing and falling back in 2018. Beyond the hype, the specific price movements of different cryptocurrencies should be investigated in a more careful way. Since the cryptocurrency market is a non-linear complex system which are not suitable analyzed by tradition methods, this paper introduces methods from econophysics. Mono-fractal analysis (detrended fluctuation analysis, DFA) is applied to investigate the price movement. Further, multi-fractal fluctuation detrended analysis (MF-DFA) is used for robustness test. Through analyzing four representative cryptocurrencies, our paper finds a strong momentum effect in BTC and ETH market, and a reversion effect in XRP and EOS when large fluctuation occurs. These findings may provide a reference for trading strategy in alternative asset allocations.

Subfields: Condensed Matter Physics, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/a3191ef73ab48efbb7bd887620eaea52c07f94fd