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Booms, busts and heavy tails: the story of Bitcoin and cryptocurrency markets

Fry, John

Authors

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Dr John Fry J.M.Fry@hull.ac.uk
Senior Lecturer in Applied Mathematics



Abstract

We develop bespoke rational bubble models for Bitcoin and cryptocurrencies that incorporate both heavy tails and the probability of a complete collapse in asset prices. Empirically, we present robustified evidence of bubbles in Bitcoin and Ethereum. Theoretically, we show that liquidity risks may generate heavy-tails in Bitcoin and cryptocurrency markets. Even in the absence of bubbles dramatic booms and busts can occur. We thus sound a timely note of caution.

Citation

Fry, J. (2018). Booms, busts and heavy tails: the story of Bitcoin and cryptocurrency markets. Economics letters, 171, 225-229. https://doi.org/10.1016/j.econlet.2018.08.008

Journal Article Type Article
Acceptance Date Aug 5, 2018
Online Publication Date Aug 9, 2018
Publication Date 2018-10
Deposit Date Feb 4, 2022
Journal Economics letters
Print ISSN 0165-1765
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 171
Pages 225-229
DOI https://doi.org/10.1016/j.econlet.2018.08.008
Keywords Bitcoin; Bubbles; Cryptocurrencies; Econophysics; Liquidity risk
Public URL https://hull-repository.worktribe.com/output/3921041
Related Public URLs https://e-space.mmu.ac.uk/621354/