A Statistical Analysis of Cryptocurrencies
30 Pages Posted: 8 Apr 2017 Last revised: 25 Dec 2018
Date Written: April 7, 2017
We show the statistical properties of the most important cryptocurrencies, of which Bitcoin is the most prominent example. We characterize their exchange rates versus the US Dollar by fitting parametric distributions to them. It is shown that returns are clearly non-normal, however, no single distribution fits well jointly to all the cryptocurrencies analysed. We find that for the most popular currencies, such as Bitcoin and Litecoin, the Generalized hyperbolic distribution gives the best fit, whilst for the smaller cryptocurrencies (determined by market capitalization) the Normal inverse Gaussian distribution, Generalized t distribution, and Laplace distributions give good fits. The results are important for investment and risk management purposes.
Keywords: Exchange rate, Distributions, Blockchain, Bitcoin, Cryptocurrencies
JEL Classification: C1, G00
Suggested Citation: Suggested Citation