Crypto-Market Network In-Formation and Bitcoin Price Dynamics and Tail Behaviour

Abstract

This study explores the role of network dynamics in the Bitcoin market. We assess whether and to what extent cryptocurrency market network connectivity predict Bitcoin returns across quantiles of the return distribution. The facets of cryptocurrency market network connectivity we consider include (i) connectivity between the on- and off-chain segments of the Bitcoin market network, (ii) the intensity of network correlations between cryptocurrencies, and the (iii) intensity and  synchronization of social and traditional crypto-focussed media activity (iii). We identify tail behavior determinants and predictors employing a quantile regression approach. The results demonstrate the effectiveness of the connectivity measures in dynamically explaining and predicting both price spikes and downfalls.

Keywords: Cryptocurrencies, Network analysis, quantile regression