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Periodicity in Cryptocurrency Volatility and Liquidity

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  • Peter Reinhard Hansen
  • Chan Kim
  • Wade Kim

Abstract

We study recurrent patterns in volatility and volume for major cryptocurrencies, Bitcoin and Ether, using data from two centralized exchanges (CEXs; Coinbase Pro and Binance) and a decentralized exchange (DEX; Uniswap V2). We find systematic patterns in both volatility and volume across day-of-the-week, hour-of-the-day, and within the hour. These patterns have grown stronger over the years and are presumably related to algorithmic trading and funding times in futures markets. We also document that price formation mainly takes place on the CEXs while price adjustments on the DEXs can be sluggish.

Suggested Citation

  • Peter Reinhard Hansen & Chan Kim & Wade Kim, 2024. "Periodicity in Cryptocurrency Volatility and Liquidity," Journal of Financial Econometrics, Oxford University Press, vol. 22(1), pages 224-251.
    • Handle: RePEc:oup:jfinec:v:22:y:2024:i:1:p:224-251.
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    File URL: http://hdl.handle.net/10.1093/jjfinec/nbac034
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    References listed on IDEAS

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    1. Asger Lunde & Peter R. Hansen, 2005. "A forecast comparison of volatility models: does anything beat a GARCH(1,1)?," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 20(7), pages 873-889.
    2. Dyhrberg, Anne H. & Foley, Sean & Svec, Jiri, 2018. "How investible is Bitcoin? Analyzing the liquidity and transaction costs of Bitcoin markets," Economics Letters, Elsevier, vol. 171(C), pages 140-143.
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    Cited by:

    1. Yufan Chen & Lan Wu & Renyuan Xu & Ruixun Zhang, 2024. "Periodic Trading Activities in Financial Markets: Mean-field Liquidation Game with Major-Minor Players," Papers 2408.09505, arXiv.org.
    2. Namryoung Lee, 2024. "Joint Impact of Market Volatility and Cryptocurrency Holdings on Corporate Liquidity: A Comparative Analysis of Cryptocurrency Exchanges and Other Firms," JRFM, MDPI, vol. 17(9), pages 1-20, September.

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    More about this item

    Keywords

    bitcoin; ether; Ethereum; cryptocurrency; high frequency data; market microstructure; realized volatility;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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