Explosive behaviour in cryptocurrency prices
Autor(a) principal: | |
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Data de Publicação: | 2022 |
Tipo de documento: | Dissertação |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10400.14/40203 |
Resumo: | Bitcoin and other cryptocurrencies have enjoyed several well-documented episodes of price exuberance since they emerged on the scene. However, in May 2022, an almost perfect storm shook their world, causing their prices to plummet to unexpected lows. This dissertation aims to contribute to the quest for episodes of exuberance, suggestive of bubbles, in cryptocurrency prices by conducting a comprehensive empirical analysis, which employs state-of-the-art tests for explosive behaviour: the Generalized Supremum Augmented Dickey Fuller (GSADF) test developed by Phillips, Shi and Yu (2015) and, as an original contribution, its panel version proposed by Pavlidis et al (2016). These tests are complemented by an array of other econometric techniques, such as unit root and cointegration tests, and Granger causality tests, to conduct a comprehensive formal investigation of periods of explosiveness in cryptocurrency prices. The formal analysis is complemented and enhanced by a narrative analysis, which aims to shed light on the factors that triggered the episodes of explosiveness. A thorough examinations of the causes of these episodes is timely, as the recent dramatic crash in the prices of cryptocurrencies is evocative of past bubble episodes. To this end, I use data for (at least) the last 5 years (2017-2022) for 7 major cryptocurrencies, which feature in the top 20 cryptocurrencies by market capitalization (Coinmarketcap.com, 18 July 2022). Moreover, after detecting the periods of exuberance in cryptocurrency prices and analysing their causes, I examine whether there have been synchronized periods of explosiveness across the selected cryptocurrencies. Furthermore, I analyse if explosiveness in one or more individual cryptocurrencies led to global explosiveness episodes across all major cryptocurrencies by using a Logit model. Additionally, using Granger causality tests, I establish connectedness across cryptocurrencies, by unveiling some causal links between them. To set the scene for the empirical investigation, I provide a brief introduction about bubbles, types of bubbles, and detection of bubbles in asset markets. Subsequently, I provide a thorough review of the relevant literature on cryptocurrencies as a different asset class, and the existing evidence of bubbles in the cryptocurrency markets. In the empirical analysis, using the GSADF test I detected several explosiveness (bubble) periods in the individual cryptocurrencies and in the panel made of selected currencies. The results reveal that Bitcoin experienced most of the long-lived bubbles. Most of the detected explosivity periods coincide with the ones documented by previous studies. However, given that the data span of my analysis includes the more recent two years, I pay special attention to the period 2020-2021. I unveil evidence of synchronicity among cryptocurrencies, especially during periods of financial turbulence. This dissertation contributes to the ongoing debate about speculative bubbles in cryptocurrency markets, by using an extended the dataset and by conducting not only GSADF tests for individual cryptocurrencies, but also the Panel GSADF in order to detect possible multiple bubbles in the cryptocurrency markets, as well as by demonstrating the existence of synchronised periods of explosivity among cryptocurrencies, that ultimately can help investors in terms of portfolio management. |
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Explosive behaviour in cryptocurrency pricesAsset market bubblesRational speculative bubblesExplosive behaviourExuberanceCryptocurrency marketSADF testGSADF testPanel GSADF testSynchronized periods of price explosivenessLogit regressionGranger causalityExplosive behaviour in cryptocurrency pricesBolhas do mercado de ativosBolhas especulativas racionaisComportamento explosivoExuberânciaMercado de criptomoedasTeste SADFTeste GSADFTeste GSADF PainelPeríodos sincronizados de explosãoRegressão LogitCausalidade de GrangerDomínio/Área Científica::Ciências Sociais::Economia e GestãoBitcoin and other cryptocurrencies have enjoyed several well-documented episodes of price exuberance since they emerged on the scene. However, in May 2022, an almost perfect storm shook their world, causing their prices to plummet to unexpected lows. This dissertation aims to contribute to the quest for episodes of exuberance, suggestive of bubbles, in cryptocurrency prices by conducting a comprehensive empirical analysis, which employs state-of-the-art tests for explosive behaviour: the Generalized Supremum Augmented Dickey Fuller (GSADF) test developed by Phillips, Shi and Yu (2015) and, as an original contribution, its panel version proposed by Pavlidis et al (2016). These tests are complemented by an array of other econometric techniques, such as unit root and cointegration tests, and Granger causality tests, to conduct a comprehensive formal investigation of periods of explosiveness in cryptocurrency prices. The formal analysis is complemented and enhanced by a narrative analysis, which aims to shed light on the factors that triggered the episodes of explosiveness. A thorough examinations of the causes of these episodes is timely, as the recent dramatic crash in the prices of cryptocurrencies is evocative of past bubble episodes. To this end, I use data for (at least) the last 5 years (2017-2022) for 7 major cryptocurrencies, which feature in the top 20 cryptocurrencies by market capitalization (Coinmarketcap.com, 18 July 2022). Moreover, after detecting the periods of exuberance in cryptocurrency prices and analysing their causes, I examine whether there have been synchronized periods of explosiveness across the selected cryptocurrencies. Furthermore, I analyse if explosiveness in one or more individual cryptocurrencies led to global explosiveness episodes across all major cryptocurrencies by using a Logit model. Additionally, using Granger causality tests, I establish connectedness across cryptocurrencies, by unveiling some causal links between them. To set the scene for the empirical investigation, I provide a brief introduction about bubbles, types of bubbles, and detection of bubbles in asset markets. Subsequently, I provide a thorough review of the relevant literature on cryptocurrencies as a different asset class, and the existing evidence of bubbles in the cryptocurrency markets. In the empirical analysis, using the GSADF test I detected several explosiveness (bubble) periods in the individual cryptocurrencies and in the panel made of selected currencies. The results reveal that Bitcoin experienced most of the long-lived bubbles. Most of the detected explosivity periods coincide with the ones documented by previous studies. However, given that the data span of my analysis includes the more recent two years, I pay special attention to the period 2020-2021. I unveil evidence of synchronicity among cryptocurrencies, especially during periods of financial turbulence. This dissertation contributes to the ongoing debate about speculative bubbles in cryptocurrency markets, by using an extended the dataset and by conducting not only GSADF tests for individual cryptocurrencies, but also the Panel GSADF in order to detect possible multiple bubbles in the cryptocurrency markets, as well as by demonstrating the existence of synchronised periods of explosivity among cryptocurrencies, that ultimately can help investors in terms of portfolio management.A Bitcoin e outras criptomoedas passaram por vários episódios bem documentados de exuberância de preços desde que surgiram. No entanto, em Maio de 2022, uma tempestade quase perfeita abalou o mundo das criptomoedas, fazendo com que os respetivos preços caíssem para mínimos inesperados. Este Trabalho Final de Mestrado pretende contribuir para a procura de episódios de exuberância, que sugiram bolhas, nos preços das criptomoedas, através da realização de uma análise empírica abrangente que recorre a testes de última geração para comportamento explosivo: o teste Generalized Supremum Augmented Dickey Fuller (GSADF) desenvolvido por Phillips, Shi e Yu (2015) e, como contributo original, a sua versão em painel proposta por Pavlidis et al. (2016). Estes testes são complementados por um conjunto de outras técnicas econométricas, tais como testes de raiz unitária e cointegração e testes de causalidade de Granger, com vista a realizar uma investigação formal abrangente de períodos de explosão nos preços das criptomoedas. A análise formal é complementada e aperfeiçoada por uma análise narrativa com vista a esclarecer os fatores que desencadearam os episódios de explosão. Uma análise minuciosa das causas destes episódios é oportuna, pois a recente queda drástica nos preços das criptomoedas evoca episódios anteriores de bolhas. Para tal, utilizo dados para (pelo menos) os últimos 5 anos (2017-2022) para 7 principais criptomoedas, que figuram entre as 20 principais criptomoedas por capitalização de mercado (Coinmarketcap.com, 18 de julho de 2022). Além disso, após detetar os períodos de exuberância nos preços das criptomoedas e analisar as suas causas, estudo se ocorreram períodos sincronizados de explosão nas criptomoedas selecionadas. Analiso igualmente se a explosão numa ou mais criptomoedas individuais conduziu a episódios globais de explosão em todas as principais criptomoedas ix utilizando um modelo Logit. Além do mais, recorrendo a testes de causalidade de Granger, estabeleço a conectividade entre criptomoedas, revelando algumas ligações causais entre as mesmas. Para definir o cenário para a investigação empírica, apresento uma breve introdução sobre bolhas, tipos de bolhas e deteção de bolhas nos mercados de ativos. Posteriormente, apresento uma revisão completa da literatura relevante sobre criptomoedas como uma classe de ativos diferente e as evidências existentes de bolhas nos mercados de criptomoedas. Na análise empírica, recorrendo ao teste GSADF, detetei vários períodos de explosão (bolha) nas criptomoedas individuais e no painel composto pelas criptomoedas selecionadas. Os resultados revelam que a Bitcoin experienciou a maioria das bolhas de longa duração. A maioria dos períodos de explosão detetados coincidem com os documentados por estudos anteriores. No entanto, dado que o período de dados da minha análise inclui os dois anos mais recentes, presto especial atenção ao período 2020-2021. Revelo evidências de sincronicidade entre criptomoedas, especialmente durante períodos de turbulência financeira. Este Trabalho Final de Mestrado contribui para o debate em curso sobre bolhas especulativas nos mercados de criptomoedas, recorrendo a um conjunto de dados alargado e realizando não apenas testes GSADF para criptomoedas individuais, mas também o GSADF Painel para detetar possíveis múltiplas bolhas nos mercados de criptomoedas, assim como demonstrando a existência de períodos sincronizados de explosão das criptomoedas que, em última análise, podem ajudar os investidores em termos de gestão de portfolios.Alves, Paulo Alexandre PimentaVeritati - Repositório Institucional da Universidade Católica PortuguesaCarvalho, Maria Francisca da Cruz Meireles Teixeira de2023-02-13T15:51:31Z2022-09-282022-09-28T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/masterThesisapplication/pdfhttp://hdl.handle.net/10400.14/40203TID:203088590enginfo:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2023-07-12T17:45:45Zoai:repositorio.ucp.pt:10400.14/40203Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-19T18:32:56.341778Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.fl_str_mv |
Explosive behaviour in cryptocurrency prices |
title |
Explosive behaviour in cryptocurrency prices |
spellingShingle |
Explosive behaviour in cryptocurrency prices Carvalho, Maria Francisca da Cruz Meireles Teixeira de Asset market bubbles Rational speculative bubbles Explosive behaviour Exuberance Cryptocurrency market SADF test GSADF test Panel GSADF test Synchronized periods of price explosiveness Logit regression Granger causality Explosive behaviour in cryptocurrency prices Bolhas do mercado de ativos Bolhas especulativas racionais Comportamento explosivo Exuberância Mercado de criptomoedas Teste SADF Teste GSADF Teste GSADF Painel Períodos sincronizados de explosão Regressão Logit Causalidade de Granger Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
title_short |
Explosive behaviour in cryptocurrency prices |
title_full |
Explosive behaviour in cryptocurrency prices |
title_fullStr |
Explosive behaviour in cryptocurrency prices |
title_full_unstemmed |
Explosive behaviour in cryptocurrency prices |
title_sort |
Explosive behaviour in cryptocurrency prices |
author |
Carvalho, Maria Francisca da Cruz Meireles Teixeira de |
author_facet |
Carvalho, Maria Francisca da Cruz Meireles Teixeira de |
author_role |
author |
dc.contributor.none.fl_str_mv |
Alves, Paulo Alexandre Pimenta Veritati - Repositório Institucional da Universidade Católica Portuguesa |
dc.contributor.author.fl_str_mv |
Carvalho, Maria Francisca da Cruz Meireles Teixeira de |
dc.subject.por.fl_str_mv |
Asset market bubbles Rational speculative bubbles Explosive behaviour Exuberance Cryptocurrency market SADF test GSADF test Panel GSADF test Synchronized periods of price explosiveness Logit regression Granger causality Explosive behaviour in cryptocurrency prices Bolhas do mercado de ativos Bolhas especulativas racionais Comportamento explosivo Exuberância Mercado de criptomoedas Teste SADF Teste GSADF Teste GSADF Painel Períodos sincronizados de explosão Regressão Logit Causalidade de Granger Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
topic |
Asset market bubbles Rational speculative bubbles Explosive behaviour Exuberance Cryptocurrency market SADF test GSADF test Panel GSADF test Synchronized periods of price explosiveness Logit regression Granger causality Explosive behaviour in cryptocurrency prices Bolhas do mercado de ativos Bolhas especulativas racionais Comportamento explosivo Exuberância Mercado de criptomoedas Teste SADF Teste GSADF Teste GSADF Painel Períodos sincronizados de explosão Regressão Logit Causalidade de Granger Domínio/Área Científica::Ciências Sociais::Economia e Gestão |
description |
Bitcoin and other cryptocurrencies have enjoyed several well-documented episodes of price exuberance since they emerged on the scene. However, in May 2022, an almost perfect storm shook their world, causing their prices to plummet to unexpected lows. This dissertation aims to contribute to the quest for episodes of exuberance, suggestive of bubbles, in cryptocurrency prices by conducting a comprehensive empirical analysis, which employs state-of-the-art tests for explosive behaviour: the Generalized Supremum Augmented Dickey Fuller (GSADF) test developed by Phillips, Shi and Yu (2015) and, as an original contribution, its panel version proposed by Pavlidis et al (2016). These tests are complemented by an array of other econometric techniques, such as unit root and cointegration tests, and Granger causality tests, to conduct a comprehensive formal investigation of periods of explosiveness in cryptocurrency prices. The formal analysis is complemented and enhanced by a narrative analysis, which aims to shed light on the factors that triggered the episodes of explosiveness. A thorough examinations of the causes of these episodes is timely, as the recent dramatic crash in the prices of cryptocurrencies is evocative of past bubble episodes. To this end, I use data for (at least) the last 5 years (2017-2022) for 7 major cryptocurrencies, which feature in the top 20 cryptocurrencies by market capitalization (Coinmarketcap.com, 18 July 2022). Moreover, after detecting the periods of exuberance in cryptocurrency prices and analysing their causes, I examine whether there have been synchronized periods of explosiveness across the selected cryptocurrencies. Furthermore, I analyse if explosiveness in one or more individual cryptocurrencies led to global explosiveness episodes across all major cryptocurrencies by using a Logit model. Additionally, using Granger causality tests, I establish connectedness across cryptocurrencies, by unveiling some causal links between them. To set the scene for the empirical investigation, I provide a brief introduction about bubbles, types of bubbles, and detection of bubbles in asset markets. Subsequently, I provide a thorough review of the relevant literature on cryptocurrencies as a different asset class, and the existing evidence of bubbles in the cryptocurrency markets. In the empirical analysis, using the GSADF test I detected several explosiveness (bubble) periods in the individual cryptocurrencies and in the panel made of selected currencies. The results reveal that Bitcoin experienced most of the long-lived bubbles. Most of the detected explosivity periods coincide with the ones documented by previous studies. However, given that the data span of my analysis includes the more recent two years, I pay special attention to the period 2020-2021. I unveil evidence of synchronicity among cryptocurrencies, especially during periods of financial turbulence. This dissertation contributes to the ongoing debate about speculative bubbles in cryptocurrency markets, by using an extended the dataset and by conducting not only GSADF tests for individual cryptocurrencies, but also the Panel GSADF in order to detect possible multiple bubbles in the cryptocurrency markets, as well as by demonstrating the existence of synchronised periods of explosivity among cryptocurrencies, that ultimately can help investors in terms of portfolio management. |
publishDate |
2022 |
dc.date.none.fl_str_mv |
2022-09-28 2022-09-28T00:00:00Z 2023-02-13T15:51:31Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
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masterThesis |
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http://hdl.handle.net/10400.14/40203 TID:203088590 |
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