Comovement and Instability in Cryptocurrency Markets

37 Pages Posted: 2 Feb 2020

See all articles by Pierangelo De Pace

Pierangelo De Pace

Pomona College - Department of Economics

Jayant Rao

Claremont Graduate University; Loyola Marymount University

Date Written: January 13, 2020


We analyze the correlations of daily price returns for nine major cryptocurrencies between April 2013 and November 2018 and estimate their evolution using bivariate and multivariate modelling approaches. We detect pronounced time variation and find these correlations to be generally increasing between early 2017 and late 2018. We then adopt a right-tail variation of the Augmented Dickey-Fuller unit root test to identify and date-stamp periods of mildly explosive behavior (statistical instability) in the time series of the Network Value to Transactions (NVT) ratio (a measure of the dollar value of cryptocurrency transaction activity relative to its network value) of six cryptocurrencies. We show statistically significant evidence of mild explosiveness in all of them. At the end of 2017 and in 2018, several major cryptocurrencies experience significant (often simultaneous) instability associated with rising NVT ratios. Instability is a steady feature of cryptocurrency markets.

Keywords: Asset Pricing, Cryptocurrencies, Comovement, Bubbles, Mild Explosiveness

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

Suggested Citation

De Pace, Pierangelo and Rao, Jayant, Comovement and Instability in Cryptocurrency Markets (January 13, 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)


Jayant Rao

Claremont Graduate University ( email )

150 E. Tenth Street
Claremont, CA 91711
United States

Loyola Marymount University ( email )

1 LMU Drive
Los Angeles, CA 90045
United States


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