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The leverage effect and other stylized facts displayed by Bitcoin returns

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  • F. N. M. de Sousa Filho
  • J. N. Silva
  • M. A. Bertella
  • E. Brigatti

Abstract

In this paper, we explore some stylized facts of the Bitcoin market using the BTC-USD exchange rate time series of historical intraday data from 2013 to 2020. Bitcoin presents some very peculiar idiosyncrasies, like the absence of macroeconomic fundamentals or connections with underlying assets or benchmarks, an asymmetry between demand and supply and the presence of inefficiency in the form of strong arbitrage opportunity. Nevertheless, all these elements seem to be marginal in the definition of the structural statistical properties of this virtual financial asset, which result to be analogous to general individual stocks or indices. In contrast, we find some clear differences, compared to fiat money exchange rates time series, in the values of the linear autocorrelation and, more surprisingly, in the presence of the leverage effect. We also explore the dynamics of correlations, monitoring the shifts in the evolution of the Bitcoin market. This analysis is able to distinguish between two different regimes: a stochastic process with weaker memory signatures and closer to Gaussianity between the Mt. Gox incident and the late 2015, and a dynamics with relevant correlations and strong deviations from Gaussianity before and after this interval.

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  • F. N. M. de Sousa Filho & J. N. Silva & M. A. Bertella & E. Brigatti, 2020. "The leverage effect and other stylized facts displayed by Bitcoin returns," Papers 2004.05870, arXiv.org, revised Jan 2021.
    • Handle: RePEc:arx:papers:2004.05870
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    Cited by:

    1. Edgardo Brigatti & Estevan Augusto Amazonas Mendes, 2021. "Testing macroecological theories in cryptocurrency market: neutral models can not describe diversity patterns and their variation," Papers 2111.02067, arXiv.org, revised Jul 2022.
    2. Ouandlous, Arav & Barkoulas, John T. & Pantos, Themis D., 2022. "Extremity in bitcoin market activity," The Journal of Economic Asymmetries, Elsevier, vol. 26(C).

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