Liquidity Co-Movements and Volatility Regimes in Cryptocurrencies

22 Pages Posted: 19 Jan 2021

See all articles by Hubert Anciaux

Hubert Anciaux

affiliation not provided to SSRN

Christophe Desagre

Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Nicolas Nicaise

affiliation not provided to SSRN

Mikael Petitjean

Catholic University of Lille - IÉSEG School of Management, Lille Campus; Lille Economie & Management (LEM) UMR 9221; Louvain School of Management (UCL); Catholic University of Louvain (UCL) - Louvain Finance (LFIN)

Date Written: January 19, 2021

Abstract

We find significant evidence of liquidity commonalities among cryptos, in particular when liquidity is estimated by relying on order-book-based proxies. Both the magnitude and pervasiveness of these co-movements are very similar to those estimated for US stocks 10 and 20 years ago. When we introduce volatility regimes based on the VCRIX volatility index on cryptocurrencies, we identify stronger liquidity co-movements in high volatility regimes across all cryptocurrencies and for all liquidity proxies. The magnitude and pervasiveness of commonalities are weaker in the low volatility regime when liquidity is arguably more idiosyncratic, affecting cryptos differently and leading to more disconnected movements relative to market liquidity. We conclude that the liquidity co-movements are not orthogonal to what was observed in the past for more centralized markets.

Keywords: Liquidity, co-movements, bitcoin, volatility, cryptos

JEL Classification: G10, G12

Suggested Citation

Anciaux, Hubert and Desagre, Christophe and Nicaise, Nicolas and Petitjean, Mikael, Liquidity Co-Movements and Volatility Regimes in Cryptocurrencies (January 19, 2021). Available at SSRN: https://ssrn.com/abstract=3769309 or http://dx.doi.org/10.2139/ssrn.3769309

Hubert Anciaux

affiliation not provided to SSRN

Christophe Desagre

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

Chaussée de Binche, 151
Mons, 7000
Belgium

Nicolas Nicaise

affiliation not provided to SSRN

Mikael Petitjean (Contact Author)

Catholic University of Lille - IÉSEG School of Management, Lille Campus ( email )

3 rue de la Digue
Lille, 59000
France
0032497301266 (Phone)
59000 (Fax)

Lille Economie & Management (LEM) UMR 9221 ( email )

Lille
France

Louvain School of Management (UCL) ( email )

Belgium

Catholic University of Louvain (UCL) - Louvain Finance (LFIN) ( email )

34 Voie du Roman Pays - L1.03.01
Louvain-la-Neuve, 1348
Belgium

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