Cross-sectional Momentum in Cryptocurrency Markets

Abstract

There is substantial evidence supporting the existence of a short-term momentum anomaly in blockchain based digital assets. Specifically, those assets which perform best (worst) over a 30 day period tend to continue to outperform (underperform) over the subsequent 7 day period. Long-only momentum trading strategies that exploit this phenomenon have consistently delivered excess returns relative to our benchmark (Bitcoin). This paper reviews the evidence of price momentum in cryptocurrency markets, explores the construction of several applicable trading strategies and the potential explanations for the momentum effect.

Keywords: momentum, cryptocurrency, trend following, crypto, blockchain, digital assets