Trading Volume in Cryptocurrency Markets

52 Pages Posted: 13 Sep 2018 Last revised: 3 Apr 2021

See all articles by Daniele Bianchi

Daniele Bianchi

School of Economics and Finance, Queen Mary University of London

Alexander Dickerson

University of Warwick - Warwick Business School; Warwick Business School

Date Written: August 24, 2019

Abstract

We investigate the information content of trading volume in the context of cryptocurrency markets and contribute to a growing literature that aims to understand the role of digital assets as an investment. The main results show that the interaction between lagged shocks to volume and past returns, positively and significantly correlates with future returns across cryptocurrency pairs. Such in-sample predictive power is economically significant; a reversal investment strategy that condition on low volume generates a significant net-of-fees risk-adjusted returns with low betas on standard sources of systematic risk. Although the largest economic performance pertains to an equal-weight implementation, we show that a value-weighted portfolio still generates significant risk-adjusted returns both when aggregating prices and volume across exchanges and when focusing on a single exchange.

Keywords: Cryptocurrency markets, Trading volume, Investments, Empirical asset pricing, Information asymmetry.

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 Road
London, London E1 4NS
United Kingdom

HOME PAGE: http://whitesphd.com

Alexander Dickerson

University of Warwick - 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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