Abstract
This paper explores the half-life volatility measure of three cryptocurrencies (Bitcoin, Litecoin and Ripple). Two GARCH family models were used (PGARCH (1, 1) and GARCH (1, 1)) with the student-t distribution. It was realised that, the PGARCH (1, 1) was the most appropriate model. Therefore, it was used in determining the half-life of the three returns series. The results revealed that, the half-life was 3 days, 6 days and 4 days for Bitcoin, Litecoin and Ripple respectively. This shows that, the three coins have strong mean reversion and short half-life and that it takes the respective days for volatility in each of coin to return half way back without further volatility.
Highlights
IntroductionA new type of currencies, a synthetic one, emerged
In recent years, a new type of currencies, a synthetic one, emerged
The results revealed that, the half-life was 3 days, 6 days and 4 days for Bitcoin, Litecoin and Ripple respectively
Summary
A new type of currencies, a synthetic one, emerged This new type of currency is named as “synthetic” because it is not the decision of a nation or state, nor represents any underlying asset or tangible wealth source. It appears as a new tradable asset resulting from a private agreement and facilitated by the anonymity of internet. Cryptocurrency is an asset derived from mathematical cryptography; it is based on a new technology called the block chain (Bradbury, 2013; Ali et al, 2014). Its other fundamental characteristics are: being decentralised, and having a fixed total number of coins: 21 million, with more than 16 million already in circulation
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