Bitcoin and Cryptocurrencies - Not for the Faint-Hearted

31 Pages Posted: 17 Nov 2016 Last revised: 25 Dec 2018

See all articles by Joerg Osterrieder

Joerg Osterrieder

University of Twente; Bern Business School

Julian Lorenz


Martin Strika

Zurich University of Applied Sciences

Date Written: October 1, 2016


Cryptocurrencies became popular with the emergence of Bitcoin and have shown an unprecedented growth over the last few years. As of November 2016, more than 720 cryptocurrencies exist, with Bitcoin still being the most popular one. We provide both a statistical analysis as well as an extreme value analysis of the returns of the most important cryptocurrencies. A particular focus is on the tail risk characteristics and we will provide an in-depth univariate and multivariate extreme value analysis. The tail dependence of cryptocurrencies is investigated (using empirical copulas). For investors - especially institutional ones - as well as regulators, an understanding of the risk and tail characteristics is of utmost importance. For cryptocurrencies to become a mainstream investable asset class, studying these properties is necessary. Our findings show that cryptocurrencies exhibit strong non-normal characteristics, large tail dependencies, depending on the particular cryptocurrencies and heavy tails. Statistical similarities can be observed for cryptocurrencies that share the same underlying technology. This has implications for risk management, financial engineering (such as derivatives on cryptocurrencies) - both from an investor's as well as from a regulator's point of view. To our knowledge, this is the first detailed study looking at the extreme value behaviour of cryptocurrencies, their correlations and tail dependencies as well as their statistical properties.

Keywords: Bitcoin, Cryptocurrency, Extreme Value Theory, Risk Management, Extreme Events

JEL Classification: C00, C1, E4, E5, G1, G2, G00

Suggested Citation

Osterrieder, Joerg and Lorenz, Julian and Strika, Martin, Bitcoin and Cryptocurrencies - Not for the Faint-Hearted (October 1, 2016). Available at SSRN: or

Joerg Osterrieder (Contact Author)

University of Twente ( email )

Drienerlolaan 5
Departement of High-Tech Business and Entrepreneur
Enschede, 7522 NB

Bern Business School ( email )

Institute of Applied Data Sciences and Finance
Bern, BE 3005

Julian Lorenz

Independent ( email )

Martin Strika

Zurich University of Applied Sciences

School of Engineering
Technikumstrasse 9
Winterthur, 8401

Do you have negative results from your research you’d like to share?

Paper statistics

Abstract Views
PlumX Metrics