Accounting for Cryptocurrency Value

Abstract

Information pertaining to new addresses is highly value-relevant in the cryptocurrency market. Innovations to the number of new addresses explain eight percent of the variations in cryptocurrency returns. Unlike traditional markets, we do not find evidence of pre- or post-drift around the release of new address information. The presence of strong market reactions at the release of new address information and the absence of drifts around the release highlight the distinct features of cryptocurrencies and provide a benchmark case where information is released publicly and continuously. Lastly, we show that the price-to-new address ratios negatively predict future cryptocurrency returns.

Keywords: Cryptocurrency, New Address, Value-Relevance, Return Predictability

JEL Classification: G12, M41