Cryptocurrencies As an Asset Class? An Empirical Assessment
59 Pages Posted: 30 Nov 2017 Last revised: 10 Feb 2018
Date Written: February 9, 2018
In this paper, I use a novel data set of prices, traded volumes, and market capitalization for a large set of cryptocurrencies to empirically investigate both their relationship with standard asset classes and the main driving factors behind market activity. The main empirical results suggest that while there is a mild relationship between returns on cryptocurrencies and commodities, e.g., gold and energy, such relationship does not translates in volatility spillover effects. Consistent with existing theoretical models in which trading activity is primarily driven by investors' sentiment, I show that traded volume is primarily driven by past returns and by a short-lived effect of aggregate market uncertainty. Finally, impulse-response functions from a panel Vector Autoregressive (VAR) model show that macroeconomic factors do not significantly drive trading activity in cryptocurrency markets.
Keywords: Cryptocurrencies, Bitcoin, Blockchain, Financial Markets, Investments
JEL Classification: G11, G12, G15, G19
Suggested Citation: Suggested Citation