A General Overview of Speculative Bubbles in the Cryptocurrency Market

Posted: 28 Jan 2021

See all articles by Elise Alfieri

Elise Alfieri

University Grenoble Alpes - Center for Studies and Applied Research in Management (CERAG); University Grenoble Alpes

Radu Burlacu

affiliation not provided to SSRN

Geoffroy Enjolras

affiliation not provided to SSRN

Date Written: January 01, 2019

Abstract

The high performance obtained by cryptocurrencies is due to their high returns as well as their high volatility. This article aims to analyze the speculative bubble aspect of the cryptocurrency market.

A bubble appears when the value deviates from its fundamental value due to low arbitrage (e.g., low number of investors) or because of asymmetric information (e.g., opacity of the system and therefore the difficulty of valuing a crypto).

Our objective is to test two hypotheses. The first one is that there is a negative relationship between the number of investors and the number of bubbles. The second one is that there is a positive relationship between opacity and number of bubbles. We study the multiple potential bubbles over the entire period from its inception to November 2020 using the PSY methodology (Phillips et al. 2015) taking into consideration heteroskedasticity issues (Phillips & Shi 2018).

Keywords: Cryptocurrency; Bitcoin; Bubble; PSY

Suggested Citation

Alfieri, Elise and Burlacu, Radu and Enjolras, Geoffroy, A General Overview of Speculative Bubbles in the Cryptocurrency Market (January 01, 2019). Available at SSRN: https://ssrn.com/abstract=3744911

Elise Alfieri (Contact Author)

University Grenoble Alpes - Center for Studies and Applied Research in Management (CERAG) ( email )

150 Rue de la Chimie
Saint-Martin-d'Hères, 38040
France

University Grenoble Alpes ( email )

151 Rue des Universités
Saint-Martin-d'Hères, 38400
France

Radu Burlacu

affiliation not provided to SSRN

Geoffroy Enjolras

affiliation not provided to SSRN

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