Trading Volume in Cryptocurrency Markets

59 Pages Posted: 13 Sep 2018 Last revised: 25 Aug 2019

See all articles by Daniele Bianchi

Daniele Bianchi

School of Economics and Finance, Queen Mary University of London

Alexander Dickerson

Warwick Business School; Warwick Business School

Date Written: August 24, 2019

Abstract

We study the value of trading volume in cryptocurrency markets and contribute to a growing literature that aims to understand the role of cryptocurrencies as investment. The main results show that the interaction between lagged volume and past returns have a significant predicting power for future returns. Such predictive power is economically significant; an investment strategy that conditions on past returns and volume generates a substantial Sharpe ratio with zero correlation with Bitcoin and Ethereum dollar returns. These results are consistent with existing theoretical models that postulate that is primarily "speculation" on private information that generates the observed returns dynamics.

Keywords: Cryptocurrency, Investments, Trading Volume, Predictability, Asymmetric Information

JEL Classification: G12, G17, E44, C58

Suggested Citation

Bianchi, Daniele and Dickerson, Alexander, Trading Volume in Cryptocurrency Markets (August 24, 2019). Available at SSRN: https://ssrn.com/abstract=3239670 or http://dx.doi.org/10.2139/ssrn.3239670

Daniele Bianchi (Contact Author)

School of Economics and Finance, Queen Mary University of London ( email )

Mile End Rd
Mile End Road
London, London E1 4NS
United Kingdom

HOME PAGE: http://whitesphd.com

Alexander Dickerson

Warwick Business School ( email )

Coventry CV4 7AL
United Kingdom
07462066472 (Phone)

Warwick Business School

Flat 83.2, Heronbank North, University of Warwick,
University of Warwick
Coventry, Warwickshire CV4 7ES
United Kingdom

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