Intraday Volume-Return Nexus in Cryptocurrency Markets: Novel Evidence From Cryptocurrency Classification

Abstract

This paper analyses the volume-return relationships across the top 30 most traded cryptocurrencies from April 2013 to June 2019 using high-frequency intraday data. We use a novel approach for the classification of cryptocurrencies with respect to multiple qualitative factors, such as geographical location of headquarters, founder and founder’s origin, platform on which the cryptocurrency is built, and consensus algorithm, among others. We identify significant bidirectional causalities between trading volume and returns at different high-frequency intervals; however, those linkages are weakening with decreasing data frequencies. The findings confirm the leading position of the Bitcoin trading volume in the cryptocurrency price formation. This evidence will help investors to design effective trading strategies in cryptocurrency markets providing useful insights from cryptocurrency categorisation.

Keywords: cryptocurrency classification, Bitcoin, volume-return relationships, Granger causality.

JEL Classification: G12, G14