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Do design features explain the volatility of cryptocurrencies?

Author

Listed:
  • Eska, Fabian E.
  • Shi, Yanghua
  • Theissen, Erik
  • Uhrig-Homburg, Marliese

Abstract

This paper examines the impact of cryptocurrency design features on their return volatility. We compile a sample of 58 cryptocurrencies, adopt the taxonomy of design features proposed by Eska et al. (2022), and estimate LASSO regressions. We document that older cryptocurrencies tend to be less volatile. Networks with mandatory transaction fees, cryptocurrencies based on (delegated) Proof-of-Stake, and those developed by private for-profit entities tend to be more volatile. Furthermore, we provide evidence that networks passing transaction fees and/or tips on to verifiers are associated with higher volatility levels.

Suggested Citation

  • Eska, Fabian E. & Shi, Yanghua & Theissen, Erik & Uhrig-Homburg, Marliese, 2024. "Do design features explain the volatility of cryptocurrencies?," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400566x
    DOI: 10.1016/j.frl.2024.105536
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    More about this item

    Keywords

    Blockchains; Cryptocurrencies; Cryptocurrency design; Volatility; LASSO;
    All these keywords.

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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