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Cryptocurrency price drivers: Wavelet coherence analysis revisited

Phillips, RC; Gorse, D; (2018) Cryptocurrency price drivers: Wavelet coherence analysis revisited. PLoS One , 13 (4) , Article e0195200. 10.1371/journal.pone.0195200. Green open access

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Abstract

Cryptocurrencies have experienced recent surges in interest and price. It has been discovered that there are time intervals where cryptocurrency prices and certain online and social media factors appear related. In addition it has been noted that cryptocurrencies are prone to experience intervals of bubble-like price growth. The hypothesis investigated here is that relationships between online factors and price are dependent on market regime. In this paper, wavelet coherence is used to study co-movement between a cryptocurrency price and its related factors, for a number of examples. This is used alongside a well-known test for financial asset bubbles to explore whether relationships change dependent on regime. The primary finding of this work is that medium-term positive correlations between online factors and price strengthen significantly during bubble-like regimes of the price series; this explains why these relationships have previously been seen to appear and disappear over time. A secondary finding is that short-term relationships between the chosen factors and price appear to be caused by particular market events (such as hacks / security breaches), and are not consistent from one time interval to another in the effect of the factor upon the price. In addition, for the first time, wavelet coherence is used to explore the relationships between different cryptocurrencies.

Type: Article
Title: Cryptocurrency price drivers: Wavelet coherence analysis revisited
Open access status: An open access version is available from UCL Discovery
DOI: 10.1371/journal.pone.0195200
Publisher version: https://doi.org/10.1371/journal.pone.0195200
Language: English
Additional information: Copyright: © 2018 Phillips, Gorse. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of Engineering Science > Dept of Computer Science
URI: https://discovery.ucl.ac.uk/id/eprint/10053081
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