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The AI revolution: are crypto markets more efficient after ChatGPT 3?

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  • Almeida, José
  • Gonçalves, Tiago Cruz

Abstract

This study examines the efficiency of crypto markets in the context of the AI revolution, focusing on AI-Crypto sectors. By employing the Adjusted Market Inefficiency Magnitude (AMIM) and conducting quantile efficiency and liquidity analyses, we observe dynamic fluctuations in market efficiency across sectors like Generative AI, AI Big Data, Cybersecurity, and Distributed Computing. Our findings reveal that most AI-Crypto sectors present a tendency towards higher efficiency in extreme market conditions. The introduction of ChatGPT 3 significantly enhanced market efficiency, with sectors associated with AI experiencing positive mean returns and increased liquidity. Our results suggest that market efficiency in these sectors is not static but evolves with technological innovations and sector-specific characteristics, in that AI-related sectors are driving the recent market dynamics, with increased liquidity and efficiency observed post-ChatGPT 3 launch. This research extends previous work on crypto market efficiency and explores the incorporation of information in AI tokenized projects, underscoring the transformative impact of AI on the crypto market landscape.

Suggested Citation

  • Almeida, José & Gonçalves, Tiago Cruz, 2024. "The AI revolution: are crypto markets more efficient after ChatGPT 3?," Finance Research Letters, Elsevier, vol. 66(C).
    • Handle: RePEc:eee:finlet:v:66:y:2024:i:c:s154461232400638x
    DOI: 10.1016/j.frl.2024.105608
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    Keywords

    Artificial intelligence (AI); Crypto assets; Quantile-based efficiency; ChatGPT;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G40 - Financial Economics - - Behavioral Finance - - - General

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