The Pricing and Performance of Cryptocurrency

The European Journal of Finance, Forthcoming

31 Pages Posted: 10 May 2018 Last revised: 26 Jun 2019

See all articles by Paul P. Momtaz

Paul P. Momtaz

University of California, Los Angeles (UCLA) - Anderson School of Management; Technische Universität München (TUM) - TUM School of Management; University College London Center for Blockchain Technologies

Date Written: May 23, 2018

Abstract

This paper examines the performance of cryptocurrencies issued in initial coin offerings (ICOs) over a three-year period after the initial exchange listing. Average (median) ICO underpricing amounts to 15% (3%), even though 4 out of 10 ICOs destroy value on the first trading day. Liquidity, market capitalization, and high-low price ratios predict returns. Long-run buy-and-hold returns are positive for the mean and negative for the median. For holding periods between one and twenty-four months, the median ICO depreciates by 30%. Evidently, there is substantial positive skewness in the cryptocurrency market. Further, a size effect emerges from the data as an empirical regularity: Large ICOs are more often overpriced and underperform in the long run.

Keywords: Initial Coin Offerings, ICOs, Token Sales, Token Offering, Cryptocurrency, Digital Currency, Virtual Currency, Distributed Ledger Technology, Blockchain, Smart Contracts, Blockchain Finance, Crowdfunding

JEL Classification: G24, G32, K22, L26

Suggested Citation

Momtaz, Paul P., The Pricing and Performance of Cryptocurrency (May 23, 2018). The European Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3169682 or http://dx.doi.org/10.2139/ssrn.3169682

Paul P. Momtaz (Contact Author)

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Technische Universität München (TUM) - TUM School of Management ( email )

Arcisstr. 21
Munich, 80333
Germany

University College London Center for Blockchain Technologies ( email )

UCL CBT UCL Computer Science
Malet Place London WC
London, London
United Kingdom

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