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Convergence in cryptocurrency prices? the role of market microstructure

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  • Apergis, Nicholas
  • Koutmos, Dimitrios
  • Payne, James E.

Abstract

Do we observe convergence between cryptocurrencies over time? This study explores this question with eight major cryptocurrencies in circulation and posits a framework to evaluate whether shifts in their market microstructures drive convergence. Three main findings emerge. First, convergence occurs between cryptocurrencies with distinct technological functions and classifications. Second, market microstructure behavior drives convergence. Third, estimated transition paths show tighter convergence for half of our sampled cryptocurrencies during the time when the Chicago Board of Exchange (CBOE) introduced bitcoin futures contracts.

Suggested Citation

  • Apergis, Nicholas & Koutmos, Dimitrios & Payne, James E., 2021. "Convergence in cryptocurrency prices? the role of market microstructure," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612319314114
    DOI: 10.1016/j.frl.2020.101685
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    More about this item

    Keywords

    Bitcoin; Club convergence; Cryptocurrencies; Market microstructure;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G17 - Financial Economics - - General Financial Markets - - - Financial Forecasting and Simulation

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