Price clustering in Bitcoin
TL;DR: In this paper, the authors study the behavior of Bitcoin prices and find significant evidence of clustering at round numbers, with over 10% of prices ending with 00 decimals compared to other variations but there is no significant pattern of returns after the round number.
About: This article is published in Economics Letters.The article was published on 2017-10-01 and is currently open access. It has received 266 citations till now. The article focuses on the topics: Round number & Cryptocurrency.
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TL;DR: A systematic review of the empirical literature based on the major topics that have been associated with the market for cryptocurrencies since their development as a financial asset in 2009 is presented in this article, where the authors provide a systematic analysis of the main topics that influence the perception of cryptocurrencies as a credible investment asset class and legitimate of value.
623 citations
Cites methods from "Price clustering in Bitcoin"
...Var Reason Selected Methodology Frequency Data Source Selected Controls N 78 Price clustering in Bitcoin Urquhart 2017 Price Market Efficiency Regression Model Daily bitcoincharts None >1,500 79 On the inefficiency of Bitcoin Nadarajah and Chu 2017 Price Market Efficiency Ljung-Box + others Daily…...
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TL;DR: It is shown that Bitcoin does not act as a safe haven, instead decreasing in price in lockstep with the S&P 500 as the crisis develops, and cast doubt on the ability of Bitcoin to provide shelter from turbulence in traditional markets.
519 citations
Cites background from "Price clustering in Bitcoin"
...This is particularly true of Bitcoin, which has been shown to be subject to bubble-like dynamics, extreme price movements and price clustering (Corbet et al., 2019; 2018a; Urquhart, 2017)....
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...This is particularly true of Bitcoin, which has been shown to be subject to bubble-like dynamics, extreme price dynamics and price clustering (Corbet et al., 2019, 2018a; Urquhart, 2017)....
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TL;DR: In this article, the prediction power of the economic policy uncertainty (EPU) index on the daily Bitcoin returns was analyzed using the Bayesian Graphical Structural Vector Autoregressive model as well as the Ordinary Least Squares and the Quantile-on-Quantile Regression estimations.
453 citations
Additional excerpts
...Finally, the previous studies investigate the volatility of Bitcoin returns (Katsiampa, 2017), the informed trading (Feng et al., 2017), the price clustering (Urquhart, 2017), and the speculative bubbles (Cheah and Fry, 2015; Corbet et al., 2017), the transaction cost (Kim, 2017)....
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TL;DR: This paper examined the existence and dates of pricing bubbles in Bitcoin and Ethereum, two popular cryptocurrencies using the (Phillips et al., 2011) methodology and concluded that Bitcoin is almost certainly in a bubble phase.
386 citations
TL;DR: The authors examined the existence and dates of pricing bubbles in Bitcoin and Ethereum, two popular cryptocurrencies using the Phillips et al. (2011) methodology and concluded that Bitcoin is almost certainly in a bubble phase.
Abstract: We examine the existence and dates of pricing bubbles in Bitcoin and Ethereum, two popular cryptocurrencies using the Phillips et al. (2011) methodology. In contrast to previous papers, we examine the fundamental drivers of the price. Having derived ratios that are economically and computationally sensible, we use these variables to detect and datestamp bubbles. Our conclusion is that there are periods of clear bubble behaviour, with Bitcoin now almost certainly in a bubble phase.
347 citations
References
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TL;DR: In this article, the authors study the market efficiency of Bitcoin and find that returns are significantly inefficient over the full sample, but when split into two subsample periods, some tests indicate that Bitcoin is efficient in the latter period.
862 citations
TL;DR: In this article, the authors explore the optimal conditional heteroskedasticity model with regards to goodness-of-fit to Bitcoin price data and find that the best model is the AR-CGARCH model, highlighting the significance of including both a short run and a long run component of the conditional variance.
730 citations
TL;DR: In this paper, an econometric model of stock price clustering was derived and estimated, and it was shown that traders would frequently use odd sixteenths when trading low-price stocks, if exchange regulations permitted trading on sixteenth's.
Abstract: Stock prices cluster on round fractions. Clustering increases with price level and volatility, and decreases with capitalization and transaction frequency. Clustering is pervasive. Price clustering will occur if traders use discrete price sets to simplify their negotiations. Exchange regulations require that most stocks be traded on eighths. Clustering on larger fractions will occur if traders choose to use discrete price sets based on quarters, halves, or whole numbers. An econometric model of clustering is derived and estimated. Projections from the results suggest that traders would frequently use odd sixteenths when trading low-price stocks, if exchange regulations permitted trading on sixteenths. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.
573 citations
TL;DR: In this article, a non-parametric causality-in-quantiles test was employed to analyse the causal relation between trading volume and Bitcoin returns and volatility, over the whole of their respective conditional distributions.
528 citations
TL;DR: In this paper, the use of peer-to-peer networks and open-source software to stop double spending and create finality of transactions is discussed, and the rise of 24/7 trading on computerized markets in Bitcoin in which there are no brokers or other agents is discussed.
Abstract: Recent innovations have made it feasible to transfer private digital currency without the intervention of an institution. A digital currency must prevent users from spending their balances more than once, which is easier said than done with purely digital currencies. Current digital currencies such as Bitcoin use peer-to-peer networks and open-source software to stop double spending and create finality of transactions. This paper explains how the use of these technologies and limitation of the quantity produced can create an equilibrium in which a digital currency has a positive value. This paper also summarizes the rise of 24/7 trading on computerized markets in Bitcoin in which there are no brokers or other agents, a remarkable innovation in financial markets. I conclude that exchanges of foreign currency may be the obvious way in which use of digital currencies can become widespread and that Bitcoin is likely to limit governments’ revenue from inflation.
482 citations