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After the Splits: Information Flow between Bitcoin and Bitcoin Family

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  • Yi, Eojin
  • Cho, Yerim
  • Sohn, Sungbin
  • Ahn, Kwangwon

Abstract

This study examines information flow between new and old forks after Bitcoin splits. Particularly, we estimate the transfer entropy between Bitcoin and Bitcoin Cash as an information-theoretic approach. When a symbolic analysis is applied, asymmetric information flow from Bitcoin to Bitcoin Cash is observed. We further provide evidence that this relationship is due to the role of liquidity in price leadership. Our findings suggest that (i) investors could forecast the fluctuation of price evolution in the Bitcoin Cash using the rise–fall pattern of Bitcoin price and (ii) policymakers (regulators) must closely monitor the information flow between the two markets, in a state with strong market integration, to prevent market distortion and regulatory arbitrage.

Suggested Citation

  • Yi, Eojin & Cho, Yerim & Sohn, Sungbin & Ahn, Kwangwon, 2021. "After the Splits: Information Flow between Bitcoin and Bitcoin Family," Chaos, Solitons & Fractals, Elsevier, vol. 142(C).
    • Handle: RePEc:eee:chsofr:v:142:y:2021:i:c:s0960077920308560
    DOI: 10.1016/j.chaos.2020.110464
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    Cited by:

    1. Assaf, Ata & Mokni, Khaled & Youssef, Manel, 2023. "COVID-19 and information flow between cryptocurrencies, and conventional financial assets," The Quarterly Review of Economics and Finance, Elsevier, vol. 89(C), pages 73-81.
    2. Kong, Xiaolin & Ma, Chaoqun & Ren, Yi-Shuai & Baltas, Konstantinos & Narayan, Seema, 2024. "A comparative analysis of the price explosiveness in Bitcoin and forked coins," Finance Research Letters, Elsevier, vol. 61(C).
    3. Khaki, Audil & Prasad, Mason & Al-Mohamad, Somar & Bakry, Walid & Vo, Xuan Vinh, 2023. "Re-evaluating portfolio diversification and design using cryptocurrencies: Are decentralized cryptocurrencies enough?," Research in International Business and Finance, Elsevier, vol. 64(C).
    4. Yaçine Merrad & Mohamed Hadi Habaebi & Elfatih A. A. Elsheikh & Fakher Eldin. M. Suliman & Md Rafiqul Islam & Teddy Surya Gunawan & Mokhtaria Mesri, 2022. "Blockchain: Consensus Algorithm Key Performance Indicators, Trade-Offs, Current Trends, Common Drawbacks, and Novel Solution Proposals," Mathematics, MDPI, vol. 10(15), pages 1-35, August.
    5. Bonga-Bonga, Lumengo & Khalique, Muhammad Masood, 2023. "The dynamic relationship between digital currency and other financial markets in developed and emerging markets," MPRA Paper 118654, University Library of Munich, Germany.
    6. Yi, Eojin & Ahn, Kwangwon & Choi, M.Y., 2022. "Cryptocurrency: Not far from equilibrium," Technological Forecasting and Social Change, Elsevier, vol. 177(C).
    7. Kong, Xiaolin & Ma, Chaoqun & Ren, Yi-Shuai & Narayan, Seema & Nguyen, Thong Trung & Baltas, Konstantinos, 2023. "Changes in the market structure and risk management of Bitcoin and its forked coins," Research in International Business and Finance, Elsevier, vol. 65(C).
    8. Kim, Daehan & Ryu, Doojin & Webb, Robert I., 2023. "Determination of equilibrium transaction fees in the Bitcoin network: A rank-order contest," International Review of Financial Analysis, Elsevier, vol. 86(C).

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