Efficiency of the Cryptocurrency Market After the COVID-19 Pandemic
https://doi.org/10.18288/1994-5124-2022-6-140-165
Abstract
The aim of this study is to test the weak form of the efficient market hypothesis for the most highly capitalized cryptocurrencies in various categories (means of payment, payment systems, blockchain platforms, and utility tokens) after March 2020. The study uses standard statistical tools – autocorrelation tests and series tests – to evaluate the hypothesis, which is then tested in another way by attempting to arrive at profitable trading strategies using information from traditional markets to decide whether to open positions in various cryptocurrencies. The results of the statistical tests conducted demonstrate an increase in the efficiency of the cryptocurrency market and a consequent reduction in the profitability of speculative trading based on past prices (technical analysis). The trading simulations show that the increased sensitivity of the cryptocurrency market to the dynamics of traditional markets after March 2020 made it possible to find trading strategies that take into account market information and are able to generate significant excess returns compared to a “buy and hold” strategy during the downturn in the digital asset markets (2021–2022) for certain cryptocurrencies (Bitcoin, Dash, Zcash, Lumen). This supports the conclusion that the efficiency of the cryptocurrency market is gradually increasing in terms of identifying trading opportunities through technical analysis. However, the increase in comovement with the traditional market would suggest that it is inefficient to predict the returns of cryptocurrencies based on external information, which turned out to be irrelevant in other studies that examined earlier periods.
About the Authors
N. A. Noskov
Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Russian Federation
Nikita A. Noskov, Bachelor Student, Institute of Economics, Mathematics and Information Technology
82, Vernadskogo pr., Moscow, 119571
K. A. Shilov
Russian Presidential Academy of National Economy and Public Administration
Russian Federation
Russian Federation
Kirill A. Shilov, Research Fellow, Laboratory of Applied Macroeconomics at the Center for Mathematical Modeling of Economic Processes of the Institute of Applied Economic Research
82, Vernadskogo pr., Moscow, 119571
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Review
For citations:
Noskov N.A., Shilov K.A. Efficiency of the Cryptocurrency Market After the COVID-19 Pandemic. Economic Policy. 2022;17(6):140-165. (In Russ.) https://doi.org/10.18288/1994-5124-2022-6-140-165
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