Abstract
We analyze the economic efficiency of the cryptocurrency market after the launch of Bitcoin futures by means of the Data Envelopment Analysis and Malmquist Indexes. Our results show that the introduction of Bitcoin futures did not affect the economic efficiency of the cryptocurrency market. However, we observe that Bitcoin obtained the highest risk-return trade-off due to its liquidity compared to the rest of cryptocurrencies. Therefore, our paper underlines the support of investors on Bitcoin to the detriment of the rest of cryptocurrencies.
Highlights
Bitcoin has been historically characterized by an explosive behavior due to its multiple bubbles since it was created by Nakamoto [1] in 2008
Unlike informational efficiency [18,19,20,21,22], the economic efficiency of the cryptocurrency market seeks to measure how efficient the market is in relation to the risk-return trade-off, which is a key variable in the classic theory of risky financial asset selection, based on the theory of expected utility [23]
When all the proxy measures to risk (standard deviation (SD), Expected Shortfall (CVaR) and Amihud’s illiquidity ratio (ILLIQ)) were employed as inputs, we found that only 1 out of 43 cryptocurrencies was efficient in the post-launch period, i.e., Bitcoin was the only cryptocurrency that exhibited an efficiency score equal to 1
Summary
Bitcoin has been historically characterized by an explosive behavior due to its multiple bubbles since it was created by Nakamoto [1] in 2008. 2013, and Fry [3], who confirmed the existence of bubbles in Bitcoin during 2015–2018 This behavior is found on Bitcoin, since Corbet et al [4] observed bubbles in Ethereum, and Bouri et al [5] highlighted the co-explosive phenomenon in the largest cryptocurrencies of the market. 2017, which gave rise to a remarkable decrease in the market capitalization and price of most of the cryptocurrencies in 2018. This situation generated doubts about the plausible existence of cryptocurrencies in the long run, since most of them could disappear as a result of repetitive bubbles and crashes. The loss of power of Bitcoin, as demonstrated by
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