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arXiv · 1904.00890

Momentum and liquidity in cryptocurrencies

Stjepan Begušić·Zvonko Kostanjčar
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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 Begušić, Zvonko Kostanjčar. 2019-04-01. Momentum and liquidity in cryptocurrencies. https://arxiv.org/abs/1904.00890

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