Investigating the Dynamics Between Price Volatility, Price Discovery, and Criminality in Cryptocurrency Markets

57 Pages Posted: 31 May 2019

See all articles by Shaen Corbet

Shaen Corbet

Dublin City University ; University of Waikato - Management School

Douglas J. Cumming

Florida Atlantic University

Brian M. Lucey

Trinity Business School, Trinity College Dublin; Ho Chi Minh City University of Economics and Finance; Jiangxi University of Finance and Economics

Maurice Peat

The University of Sydney; Financial Research Network (FIRN)

Samuel Vigne

Trinity College (Dublin) - Trinity Business School

Date Written: May 3, 2019

Abstract

This paper identifies several stylised facts relating to the volatility and price discovery process from eight cryptocurrencies utilising an empirical analysis of intra-day trading data to uncover four main results. First, cryptocurrencies exhibit weekend-volatility effects while intra-day volatility is found to be influenced by international trading times, periods of substantial volatility in the markets for oil, and GBP/USD and cybercrime events. Secondly, a thorough investigation of recent cybercriminality identifies that cryptocurrency hacks are found to increase both the volatility of the currency hacked and the correlations across the hacked currency and other cryptocurrencies. Thirdly, hacks significantly reduce price discovery sourced within the hacked currency relative to other cryptocurrencies. Finally, there are abnormal returns associated with the hacks observed in the hours prior to the actual hacking event, which reverts to zero at the time of the public announcement of the hack.

Keywords: criminality, cryptocurrency, information share, volatility, price discovery

JEL Classification: K42, G14, D3

Suggested Citation

Corbet, Shaen and Cumming, Douglas J. and Lucey, Brian M. and Peat, Maurice and Vigne, Samuel, Investigating the Dynamics Between Price Volatility, Price Discovery, and Criminality in Cryptocurrency Markets (May 3, 2019). Available at SSRN: https://ssrn.com/abstract=3384707 or http://dx.doi.org/10.2139/ssrn.3384707

Shaen Corbet

Dublin City University ( email )

Dublin 9
Ireland

University of Waikato - Management School ( email )

Hamilton
New Zealand

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://sites.google.com/view/douglascumming/bio?authuser=0

Brian M. Lucey (Contact Author)

Trinity Business School, Trinity College Dublin ( email )

The Sutherland Centre, Level 6, Arts Building
Dublin 2
Ireland
+353 1 608 1552 (Phone)
+353 1 679 9503 (Fax)

Ho Chi Minh City University of Economics and Finance ( email )

59C Nguyen Dình Chieu
6th Ward, District 3
Ho Chi Minh City, Ho Chi Minh 70000
Vietnam

Jiangxi University of Finance and Economics ( email )

South Lushan Road
Nanchang, Jiangxi 330013
China

Maurice Peat

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Samuel Vigne

Trinity College (Dublin) - Trinity Business School ( email )

Aras an Phiarsaigh
College Green
Dublin, Leinster D2
Ireland

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