Abstract
This paper investigates the dynamic relationship between market efficiency, liquidity, and multifractality of Bitcoin. We find that before 2013 liquidity is low and the Hurst exponent is less than 0.5, indicating that the Bitcoin time series is anti-persistent. After 2013, as liquidity increased, the Hurst exponent rose to approximately 0.5, improving market efficiency. For several periods, however, the Hurst exponent was found to be significantly less than 0.5, making the time series anti-persistent during those periods. We also investigate the multifractal degree of the Bitcoin time series using the generalized Hurst exponent and find that the multifractal degree is related to market efficiency in a non-linear manner.
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Notes
Since we find no trading data from January 4, 2015 to January 9, 2015 due to the hacking incident to Bitstamp, we patch the missing data with the data from Bitfinex at Bitcoincharts.
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Acknowledgements
The fund was provided by Japan Society for the Promotion of Science (Grand No: JP18K01556). Numerical calculations for this work were carried out at the Yukawa Institute Computer Facility and at the facilities of the Institute of Statistical Mathematics.
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Takaishi, T., Adachi, T. Market Efficiency, Liquidity, and Multifractality of Bitcoin: A Dynamic Study. Asia-Pac Financ Markets 27, 145–154 (2020). https://doi.org/10.1007/s10690-019-09286-0
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DOI: https://doi.org/10.1007/s10690-019-09286-0