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On the Efficiency and Its Drivers in the Cryptocurrency Market: The Case of Bitcoin and Ethereum

In: Blockchain, Crypto Assets, and Financial Innovation

Author

Listed:
  • Khaled Mokni

    (Université Internationale de Rabat)

  • Ghassen El Montasser

    (ESCT School of Tunis, University of Manouba)

  • Ahdi Noomen Ajmi

    (ESCT School of Tunis, University of Manouba
    Université de Manouba)

  • Elie Bouri

    (Lebanese American University)

Abstract

Most previous studies on the market efficiency of cryptocurrencies consider time evolution but do not provide insights into the potential driving factors. This study addresses this limitation by examining the time-varying efficiency of the two largest cryptocurrencies, Bitcoin and Ethereum, and the factors that drive efficiency. It uses daily data from August 7, 2016, to February 15, 2023, the adjusted market inefficiency magnitude (AMIMs) measure, and quantile regression. The results show evidence of time variation in the levels of market (in)efficiency for Bitcoin and Ethereum. Interestingly, the quantile regressions indicate that global financial stress negatively affects the AMIMs measures across all quantiles. Notably, cryptocurrency liquidity positively and significantly affects AMIMs irrespective of the level of (in) efficiency, whereas the positive effect of money flow is significant when the markets of both cryptocurrencies are efficient. Finally, the COVID-19 pandemic positively and significantly affected cryptocurrency market inefficiencies across most quantiles.

Suggested Citation

  • Khaled Mokni & Ghassen El Montasser & Ahdi Noomen Ajmi & Elie Bouri, 2025. "On the Efficiency and Its Drivers in the Cryptocurrency Market: The Case of Bitcoin and Ethereum," Springer Books, in: Gang Kou & Yongqiang Li & Zongyi Zhang & J. Leon Zhao & Zhi Zhuo (ed.), Blockchain, Crypto Assets, and Financial Innovation, pages 162-191, Springer.
    • Handle: RePEc:spr:sprchp:978-981-96-6839-7_6
    DOI: 10.1007/978-981-96-6839-7_6
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    Cited by:

    1. is not listed on IDEAS
    2. Vuković, Darko B. & Frömmel, Michael & Vigne, Samuel A. & Zinovev, Vyacheslav, 2025. "Spillovers between cryptocurrencies and financial markets in a global framework," Journal of International Money and Finance, Elsevier, vol. 150(C).
    3. Giorgos Demosthenous & Chryssis Georgiou & Eliada Polydorou, 2025. "From On-chain to Macro: Assessing the Importance of Data Source Diversity in Cryptocurrency Market Forecasting," Papers 2506.21246, arXiv.org.
    4. Mingnan Li & Viktor Manahov & John Ashton, 2025. "The impact of cryptocurrency heists on Bitcoin's market efficiency," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 30(3), pages 2912-2929, July.
    5. Przemysław Grądzki & Piotr Wójcik & Stefan Lessmann, 2025. "Algorithmic crypto trading using information-driven bars, triple barrier labeling and deep learning," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 11(1), pages 1-43, December.

    More about this item

    Keywords

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    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

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