Abstract
Time series of price returns for 80 of the most liquid cryptocurrencies listed on Binance are investigated for the presence of detrended cross-correlations. A spectral analysis of the detrended correlation matrix and a topological analysis of the minimal spanning trees calculated based on this matrix are applied for different positions of a moving window. The cryptocurrencies become more strongly cross-correlated among themselves than they used to be before. The average cross-correlations increase with time on a specific time scale in a way that resembles the Epps effect amplification when going from past to present. The minimal spanning trees also change their topology and, for the short time scales, they become more centralized with increasing maximum node degrees, while for the long time scales they become more distributed, but also more correlated at the same time. Apart from the inter-market dependencies, the detrended cross-correlations between the cryptocurrency market and some traditional markets, like the stock markets, commodity markets, and Forex, are also analyzed. The cryptocurrency market shows higher levels of cross-correlations with the other markets during the same turbulent periods, in which it is strongly cross-correlated itself.
Highlights
Over the past few years, two processes have had a strong impact on financial markets: the emergence of the cryptocurrency market [1,2,3,4,5] and the COVID-19 pandemic [6,7,8,9,10,11,12]
The cryptocurrency market is an interesting object for analysis from the perspective of complex systems, as it is a unique financial market whose establishment and evolution was entirely spontaneous with no intervening government or other regulatory institution
Dependent detrended cross-correlation coefficient ρq (s) given by Equation (6) was determined for a number of time scales s from s = 10 min to s = 360 min and different values of the filtering parameter q
Summary
Over the past few years, two processes have had a strong impact on financial markets: the emergence of the cryptocurrency market [1,2,3,4,5] and the COVID-19 pandemic [6,7,8,9,10,11,12]. Each of these processes alone has already been a topic in numerous pieces of the scientific literature, but they were studied together [5,13,14,15,16,17,18,19,20,21]. One can count the sparse analyses based on highfrequency data, the exaggerated focus on bitcoin (BTC) alone, and the insufficient attention paid to how different mining protocols can affect the related asset properties and how various legal regulations being ( or potentially) imposed on the cryptocurrency markets can perturb both the mining and the trade [4]
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