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Centralized and decentralized bitcoin markets: Euro vs USD vs GBP

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  • Roman Matkovskyy

    (ESC [Rennes] - ESC Rennes School of Business)

Abstract

In this study, I compared the euro, U.S. dollar, and British pound sterling (GBP) centralized and decentralized bitcoin cryptocurrency markets in terms of return volatility and interdependency. This comparison showed the decentralized bitcoin market has higher volatility and the centralized markets have higher tail dependence regarding returns. The volatility analysis results are contrary to the established leverage reasons that market drops cause volatility. The results demonstrate a higher left tail dependence is in line with the general pattern in "traditional" financial markets which more extreme dependent in downturns. It was also shown trade volume increases as prices decrease, demonstrating participants' lack of confidence and consensus in a price-jump period.

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  • Roman Matkovskyy, 2019. "Centralized and decentralized bitcoin markets: Euro vs USD vs GBP," Post-Print hal-02127175, HAL.
    • Handle: RePEc:hal:journl:hal-02127175
    DOI: 10.1016/j.qref.2018.09.005
    Note: View the original document on HAL open archive server: https://rennes-sb.hal.science/hal-02127175
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    Cited by:

    1. Matkovskyy, Roman & Jalan, Akanksha & Dowling, Michael, 2020. "Effects of economic policy uncertainty shocks on the interdependence between Bitcoin and traditional financial markets," The Quarterly Review of Economics and Finance, Elsevier, vol. 77(C), pages 150-155.
    2. Haffar, Adlane & Le Fur, Éric, 2022. "Time-varying dependence of Bitcoin," The Quarterly Review of Economics and Finance, Elsevier, vol. 86(C), pages 211-220.
    3. Hu, Yang & Hou, Yang (Greg) & Oxley, Les & Corbet, Shaen, 2021. "Does blockchain patent-development influence Bitcoin risk?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 70(C).
    4. Sebastião, Helder & Godinho, Pedro, 2020. "Bitcoin futures: An effective tool for hedging cryptocurrencies," Finance Research Letters, Elsevier, vol. 33(C).
    5. Khaki, Audil & Prasad, Mason & Al-Mohamad, Somar & Bakry, Walid & Vo, Xuan Vinh, 2023. "Re-evaluating portfolio diversification and design using cryptocurrencies: Are decentralized cryptocurrencies enough?," Research in International Business and Finance, Elsevier, vol. 64(C).
    6. Samet Gunay & Kerem Kaskaloglu & Shahnawaz Muhammed, 2021. "Bitcoin and Fiat Currency Interactions: Surprising Results from Asian Giants," Mathematics, MDPI, vol. 9(12), pages 1-18, June.
    7. Matkovskyy, Roman & Jalan, Akanksha, 2019. "From financial markets to Bitcoin markets: A fresh look at the contagion effect," Finance Research Letters, Elsevier, vol. 31(C), pages 93-97.
    8. Zhengtang Fu & Peiwu Dong & Siyao Li & Yanbing Ju, 2021. "An intelligent cross-border transaction system based on consortium blockchain: A case study in Shenzhen, China," PLOS ONE, Public Library of Science, vol. 16(6), pages 1-22, June.
    9. Będowska-Sójka, Barbara & Kliber, Agata, 2021. "Is there one safe-haven for various turbulences? The evidence from gold, Bitcoin and Ether," The North American Journal of Economics and Finance, Elsevier, vol. 56(C).
    10. Jinsha Zhao, 2022. "Do economic crises cause trading in Bitcoin?," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 14(4), pages 465-490, April.
    11. A. Hachicha & F. Hachicha, 2021. "Analysis of the bitcoin stock market indexes using comparative study of two models SV with MCMC algorithm," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 647-673, February.
    12. BRIK, Hatem & El OUAKDI, Jihene & FTITI, Zied, 2022. "Roles of stable versus nonstable cryptocurrencies in Bitcoin market dynamics," Research in International Business and Finance, Elsevier, vol. 62(C).
    13. César Garcia-Gomez & Ana Pérez & Mercedes Prieto-Alaiz, 2022. "The evolution of poverty in the EU-28: a further look based on multivariate tail dependence," Working Papers 605, ECINEQ, Society for the Study of Economic Inequality.
    14. Uzonwanne, Godfrey, 2021. "Volatility and return spillovers between stock markets and cryptocurrencies," The Quarterly Review of Economics and Finance, Elsevier, vol. 82(C), pages 30-36.
    15. Kliber, Agata & Marszałek, Paweł & Musiałkowska, Ida & Świerczyńska, Katarzyna, 2019. "Bitcoin: Safe haven, hedge or diversifier? Perception of bitcoin in the context of a country’s economic situation — A stochastic volatility approach," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 524(C), pages 246-257.
    16. Cem Cagri Donmez & Doruk Sen & Ahmet Fatih Dereli & M. Bilal Horasan & Cagri Yildiz & Nergis Feride Kaplan Donmez, 2021. "An Investigation of Fiat Characterization and Evolutionary Dynamics of the Cryptocurrency Market," SAGE Open, , vol. 11(1), pages 21582440219, February.

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    More about this item

    Keywords

    ARMA-GARCH copula; Dependency; Volatility; Decentralized exchange; Bitcoin; Centralized exchange;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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