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Market efficiency, liquidity, and multifractality of Bitcoin: A dynamic study

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  • Tetsuya Takaishi
  • Takanori Adachi

Abstract

This letter 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.

Suggested Citation

  • Tetsuya Takaishi & Takanori Adachi, 2019. "Market efficiency, liquidity, and multifractality of Bitcoin: A dynamic study," Papers 1902.09253, arXiv.org.
    • Handle: RePEc:arx:papers:1902.09253
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    References listed on IDEAS

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    1. Kristjanpoller, Werner & Bouri, Elie & Takaishi, Tetsuya, 2020. "Cryptocurrencies and equity funds: Evidence from an asymmetric multifractal analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 545(C).
    2. Marcin Wk{a}torek & Jaros{l}aw Kwapie'n & Stanis{l}aw Dro.zd.z, 2022. "Multifractal cross-correlations of bitcoin and ether trading characteristics in the post-COVID-19 time," Papers 2208.01445, arXiv.org.
    3. Takaishi, Tetsuya, 2020. "Rough volatility of Bitcoin," Finance Research Letters, Elsevier, vol. 32(C).
    4. Marcin Wątorek & Jarosław Kwapień & Stanisław Drożdż, 2022. "Multifractal Cross-Correlations of Bitcoin and Ether Trading Characteristics in the Post-COVID-19 Time," Future Internet, MDPI, vol. 14(7), pages 1-15, July.
    5. Bouri, Elie & Lau, Chi Keung Marco & Saeed, Tareq & Wang, Shixuan & Zhao, Yuqian, 2021. "On the intraday return curves of Bitcoin: Predictability and trading opportunities," International Review of Financial Analysis, Elsevier, vol. 76(C).

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