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Can Bitcoin Be A Stable Investment?

Author

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  • CELIK, Ismail

    (Department of Banking and Finance, Burdur Mehmet Akif Ersoy University, Turkey.)

Abstract

This study aims to analyze the volatility structure of Bitcoin returns, which became a popular investment after 2009. The Fractal Market Hypothesis (FMH) is chosen as the instrument to investigate the issue. By testing this hypothesis, the sudden price fluctuations in Bitcoin returns were tried to be determined. Daily closing price of Bitcoin between 04/2013-01/2019 were obtained from coinmarketcap. The fractal nature of Bitcoin market is tested with R/S, DFA, Periodogram and GPH models. The Hurst exponents show that FMH is valid in the Bitcoin market. Additionally, the effect of financial bubble formation and structural breaks on fractality is investigated through the ARFIMA-FIGARCH and ARFIMA-HYGARCH models. We observe that financial bubbles and regime changes increase the fractal structure (long memory) in the Bitcoin market.

Suggested Citation

  • CELIK, Ismail, 2020. "Can Bitcoin Be A Stable Investment?," Studii Financiare (Financial Studies), Centre of Financial and Monetary Research "Victor Slavescu", vol. 24(2), pages 19-36, June.
    • Handle: RePEc:vls:finstu:v:24:y:2020:i:2:p:19-36
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    References listed on IDEAS

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    More about this item

    Keywords

    Fractal Market Hypothesis; Hurst Exponent; Financial Bubbles; FIGARCH; HYGARCH;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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