Abstract
This paper reports evidence of intraday return predictability, consisting of both intraday momentum and reversal, in the cryptocurrency market. Using high-frequency price data on Bitcoin from March 3, 2013, to May 31, 2020, it shows that the patterns of intraday return predictability change in the presence of large intraday price jumps, FOMC announcement release, liquidity levels, and the outbreak of the COVID-19. Intraday return predictability is also found in other actively traded cryptocurrencies such as Ethereum, Litecoin, and Ripple. Further analysis shows that the timing strategy based on the intraday predictors produces higher economic value than the benchmark strategy such as the always-long or the buy-and-hold. Evidence of intraday momentum can be explained in light of the theory of late-informed investors, whereas evidence of intraday reversal, which is unique to the cryptocurrency market, can be related to investors’ overreaction to non-fundamental information and overconfidence bias.
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