Marcin Wątorek

Author(s):
Marcin Wątorek Polish Academy of Sciences, Institute of Nuclear Physics, Kraków

Abstract title:
Cryptocurrency market evolution

Abstract:
Since the beginning of 2017, Bitcoin price has increased from 1000$ to 20,000$. This striking, possibly unprecedented, rapidity of market capitalization ended on 16.12.2017, when the market experienced a spectacular trend reversal, from strongly increasing to sharply decreasing, both large trends being accompanied by well-evident, smaller-scale oscillations. These events motivated us to compare BTC/USD fluctuation properties to the stylized facts of mature world markets. While early trading was affected by system-specific irregularities, it is found that over the months preceding Apr 2018 all these statistical indicators approach the features hallmarking maturity. It also appears that the maturity of the Bitcoin has cascaded onto other cryptocurrencies, leading to the emergence of a seemingly-independent world cryptocurrency market, akin to the foreign exchange. Based on high-frequency (10s) trade recordings on the Kraken cryptocurrency exchange, we show that, remarkably, the cryptocurrencies have already started developing multifractal cross-correlations, even when traded directly among themselves. The analysis of the detrended cross-correlation coefficients reveals a dependence on the time scales which may be caused by large arbitrage opportunities that occurred in the past. By the end of 2018, these opportunities have decreased significantly, making the cryptocurrency market more synchronized.