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How are Bitcoin forks related to Bitcoin?

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  • Bazán-Palomino, Walter

Abstract

This paper studies the interlinkages among Bitcoin and seven Bitcoin forks, which share proof-of-work. To this end, I propose two volatility indexes and one correlation index based on the estimation of three multivariate GARCH models. This study finds that the contribution of the Bitcoin-fork volatility to the market volatility is stronger in the first two months after the occurrence of a fork, and low thereafter. Furthermore, the correlation of Bitcoin with four Bitcoin forks is negative or low during high-volatility times and highly positive during low-volatility times. The other three Bitcoin forks do not show this correlation pattern.

Suggested Citation

  • Bazán-Palomino, Walter, 2021. "How are Bitcoin forks related to Bitcoin?," Finance Research Letters, Elsevier, vol. 40(C).
    • Handle: RePEc:eee:finlet:v:40:y:2021:i:c:s1544612320307522
    DOI: 10.1016/j.frl.2020.101723
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    More about this item

    Keywords

    Multivariate volatility models; Bitcoin; Bitcoin forks; Volatility indexes; Time-varying correlation index;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • G1 - Financial Economics - - General Financial Markets

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