Abstract
Bitcoin’s evolution has attracted the attention of investors and researchers looking for a better understanding of the efficiency of cryptocurrency markets, considering their prices and volatility. The purpose of this paper is to contribute to this understanding by studying the degree of persistence of the Bitcoin measured by the Hurst exponent, considering prices from the Brazilian market, and comparing with Bitcoin in USD as a benchmark. We applied Detrended Fluctuation Analysis (DFA), for the period from 9 April 2017 to 30 June 2018, using daily closing prices, with a total of 429 observations. We focused on two prices of Bitcoins resulting from negotiations made by two different Brazilian financial institutions: Foxbit and Mercado. The results indicate that Mercado and Foxbit returns tend to follow Bitcoin dynamics and all of them show persistent behavior, although the persistence in slightly higher for the Brazilian Bitcoin. However, this evidence does not necessarily mean opportunities for abnormal profits, as aspects such as liquidity or transaction costs could be impediments to this occurrence.
Highlights
Introduction and Literature ReviewFinancial markets represent a broad issue that has been well studied in the literature
The purpose of this paper is to contribute to this understanding by studying the degree of persistence of the Bitcoin measured by the Hurst exponent, considering prices from the Brazilian market, and comparing with Bitcoin in USD as a benchmark
We focused on two prices of Bitcoins resulting from negotiations made by two different Brazilian financial institutions: Foxbit and Mercado
Summary
Introduction and Literature ReviewFinancial markets represent a broad issue that has been well studied in the literature. One of the most interesting topics is analysis of the Efficient Market Hypothesis (EMH), which is used to support the analysis made in this work It is acknowledged as a fundamental financial theory by (Fama 1970), which considers that competition among the many intelligent participants of a market assures that actual prices of individual securities reflect the effects of information based both on events that have already occurred and those which the market expects to take place in the future. The strong form of EMH is identified when there is an indication that all relevant information about the value of a share is quickly and accurately reflected in the market price. The approach we use in this paper could be linked with this weak form
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