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Momentum and liquidity in cryptocurrencies

Author

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  • Stjepan Beguv{s}i'c
  • Zvonko Kostanjv{c}ar

Abstract

The goal of this paper is to explore the relationship between momentum effects and liquidity in cryptocurrency markets. Portfolios based on momentum-liquidity bivariate sorts are formed and rebalanced on a varying number of cryptocurrencies through time. We find a strong momentum effect in the most liquid cryptocurrencies, which supports the theories of investor herding behavior. Moreover, we propose two profitable long-only strategies: the illiquid losers and liquid winners, which exhibit improved risk adjusted performance over the market capitalization weighted portfolio.

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  • Stjepan Beguv{s}i'c & Zvonko Kostanjv{c}ar, 2019. "Momentum and liquidity in cryptocurrencies," Papers 1904.00890, arXiv.org.
    • Handle: RePEc:arx:papers:1904.00890
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    File URL: http://arxiv.org/pdf/1904.00890
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    Cited by:

    1. Nichanan Sakolvieng, 2024. "Optimizing Cryptocurrency Portfolios: A Comparative Study of Rebalancing Strategies," GATR Journals jfbr220, Global Academy of Training and Research (GATR) Enterprise.

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