Comovement and Instability in Cryptocurrency Markets

46 Pages Posted: 2 Feb 2020 Last revised: 7 Jul 2020

Date Written: July 7, 2020


We analyze the extent of comovement between daily price returns of nine major cryptocurrencies during the first three main phases of their development, from April 2013 to November 2018. We assess its evolution using bivariate and multivariate modeling approaches and detect pronounced time variation. Generally, comovement is initially low and positive, but increases between early 2017 and late 2018. We then adopt a right-tail version of the Augmented Dickey-Fuller unit root test to identify periods of mildly explosive behavior (statistical instability) in the Network Value to Transactions (NVT) ratio (a measure of the dollar value of cryptocurrency transaction activity relative to network value) of six cryptocurrencies. We show evidence of significant mild explosiveness in all of them. At the end of 2017 and in 2018, several cryptocurrencies experience often simultaneous instability associated with rising NVT ratios. Instability is a dominant feature of these markets.

Keywords: Asset Pricing, Cryptocurrencies, Comovement, NVT Ratio, Mild Explosiveness

JEL Classification: C58, G1, G10, G11, G12

Suggested Citation

De Pace, Pierangelo and Rao, Jayant, Comovement and Instability in Cryptocurrency Markets (July 7, 2020). Available at SSRN: or

Pierangelo De Pace (Contact Author)

Pomona College - Department of Economics ( email )

425 N College Avenue
Carnegie Building, Room 205
Claremont, CA 91711
United States
+19096218744 (Phone)


No contact information is available for Jayant Rao

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