Abstract
Cryptocurrencies have been receiving the sustained attention of investors since 2009. These new investment vehicles are digitally native, meaning that they are traded exclusively on 24/7 digital platforms. Consequently, they offer an excellent scenario to test the Efficient Market Hypothesis, by developing algorithm-based trading strategies. Such strategies aim to beat the market. It has been previously reported that daily returns do not exhibit long range dependence. However, daily volatility in major cryptocurrencies is highly persistent. Therefore, buy/hold/sell decision support systems could be able to capture such market inefficiency. This is especially important for investors interested in periodically trading a set of cryptocurrencies, in order to maximize their wealth. This paper presents a dynamic linguistic decision making approach for building decision models to support cryptocurrency investors in buy/hold/sell decisions. This approach exhibits a good computational performance for obtaining recommendations based on quantitative data. Moreover, this procedure is able to identify some inefficient cryptocurrency behaviors which are not captured by traditional econometric techniques. Our results uncover arbitrage opportunities that outperform buy-and-hold or random strategies.
Highlights
I N 2009 a white paper authored under the pseudonym of Satoshi Nakamoto was published that set the basis for blockchain, a new paradigm in peer-to-peer transactions [1]
This paper presents a dynamic linguistic decision making approach for building decision models to support cryptocurrency investors in buy/hold/sell decisions
The aim of this paper is to show the suitability of multiperiod multi-attribute models (MP-multiple attribute decision making (MADM)) [26] in order to convey useful information to advise a cryptocurrency investor or day trader
Summary
I N 2009 a white paper authored under the pseudonym of Satoshi Nakamoto was published that set the basis for blockchain, a new paradigm in peer-to-peer transactions [1]. The foremost product that emerged from blockchain is bitcoin, and by extension, other cryptocurrencies. Users are able to exchange value digitally without third party oversight [2]. Their existence is possible thanks to the blockchain technology that consists of a distributed system that logs transaction records on linked blocks and store them on an encrypted digital ledger. The records in the blockchain system are spread across a network of replicated databases that are always synchronized. As of October 2020, there are more than 7000 cryptocurrencies, traded in 31000 online venues, with a total market capitalization of $391 billion, and daily transactions exceeding $94 billion [3]. Bitcoin is the biggest player in this market, accounting for
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
