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Virtual relationships: Short- and long-run evidence from BitCoin and altcoin markets

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  • Ciaian, Pavel
  • Rajcaniova, Miroslava
  • Kancs, d'Artis

Abstract

This paper empirically examines interdependencies between BitCoin and altcoin markets in the short- and long-run. We apply time-series analytical mechanisms to daily data of 17 virtual currencies (BitCoin + 16 alternative virtual currencies) and two altcoin price indices for the period 2013–2016. Our empirical findings confirm that indeed BitCoin and altcoin markets are interdependent. The BitCoin-altcoin price relationship is significantly stronger in the short-run than in the long-run. We cannot fully confirm the hypothesis that the BitCoin price relationship is stronger with those altcoins that are more similar in their price formation mechanism to BitCoin. In the long-run, macro-financial indicators determine the altcoin price formation to a slightly greater degree than BitCoin does. The virtual currency supply is exogenous and therefore plays only a limited role in the price formation.

Suggested Citation

  • Ciaian, Pavel & Rajcaniova, Miroslava & Kancs, d'Artis, 2018. "Virtual relationships: Short- and long-run evidence from BitCoin and altcoin markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 52(C), pages 173-195.
  • Handle: RePEc:eee:intfin:v:52:y:2018:i:c:p:173-195
    DOI: 10.1016/j.intfin.2017.11.001
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    References listed on IDEAS

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    4. Ciaian, Pavel & Rajcaniova, Miroslava & Kancs, d'Artis, 2018. "Virtual relationships: Short- and long-run evidence from BitCoin and altcoin markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 52(C), pages 173-195.
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    Cited by:

    1. Ciaian, Pavel & Rajcaniova, Miroslava & Kancs, d'Artis, 2018. "Virtual relationships: Short- and long-run evidence from BitCoin and altcoin markets," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 52(C), pages 173-195.
    2. Thomas Walther & Tony Klein & Hien Pham Thu, 2018. "Bitcoin is not the New Gold - A Comparison of Volatility, Correlation, and Portfolio Performance," Working Papers on Finance 1812, University of St. Gallen, School of Finance.
    3. Baumohl, Eduard, 2018. "Are cryptocurrencies connected to forex? A quantile cross-spectral approach," EconStor Preprints 174884, ZBW - German National Library of Economics.

    More about this item

    Keywords

    BitCoin; Altcoins; Virtual currencies; Price formation; Investment; Supply; Demand; Macroeconomic development;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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