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Cryptocurrency bubbles, information asymmetry and noise trading

Author

Listed:
  • Élise Alfieri

    (IRG - Institut de Recherche en Gestion - UPEC UP12 - Université Paris-Est Créteil Val-de-Marne - Paris 12 - Université Gustave Eiffel)

  • Radu Burlacu

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes)

  • Geoffroy Enjolras

    (CERAG - Centre d'études et de recherches appliquées à la gestion - UGA - Université Grenoble Alpes, UGA INP IAE - Grenoble Institut d'Administration des Entreprises - UGA - Université Grenoble Alpes - Grenoble INP - Institut polytechnique de Grenoble - Grenoble Institute of Technology - UGA - Université Grenoble Alpes)

Abstract

Purpose: This paper examines the relationship between the degree of information asymmetry among investors and the occurrence of bubbles in cryptocurrency markets. Design/methodology/approach! The study applies the Philipps, Shi and Yu (PSY) methodology to identify bubbles in 74 cryptocurrencies from July 2014 to April 2021. Findings: The findings indicate that there is a negative relationship between the degree of information asymmetry among investors and the number and duration of bubbles across cryptocurrencies. Originality/value: This finding supports the riding-bubble argument of Asako et al. (2020), which suggests that when the information asymmetry among investors is high, rational investors are less certain about what irrational, inexperienced investors might decide. This strategic uncertainty leads rational investors to close out their positions more quickly, resulting in a shorter duration of the bubble and a reduced propensity for new bubbles to emerge. The study's findings hold regardless of the proxies used to measure information asymmetry and noise trading, cryptocurrency characteristics and regression model specifications.

Suggested Citation

  • Élise Alfieri & Radu Burlacu & Geoffroy Enjolras, 2025. "Cryptocurrency bubbles, information asymmetry and noise trading," Post-Print hal-04968612, HAL.
    • Handle: RePEc:hal:journl:hal-04968612
    DOI: 10.1108/JRF-07-2024-0220
    as

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