Liquidity in the cryptocurrency market and commonalities across anomalies |
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| Institution: | 1. Department of Banking and Financial Management University of Piraeus;2. Aston Business School Aston University, United Kingdom;1. School of Business Administration, Faculty of Social Sciences, University of Haifa, Haifa, 3498838, Israel;2. Department of Business Administration, Ono Academic College, Kiryat Ono, Israel;3. School of Management, Western Galilee College, Acre, Israel;1. School of Statistics and Mathematics, Central University of Finance and Economics, Beijing 100081, China;2. School of Finance, Central University of Finance and Economics, Beijing 100081, China;1. DCU Business School, Dublin City University, Dublin 9, Ireland;2. School of Accounting, Finance and Economics, University of Waikato, New Zealand;3. Institute for Policy Research, University of Bath, UK;4. Trinity Business School, Trinity College Dublin, Dublin 2, Ireland;5. Kreiger School of Arts & Sciences, Johns Hopkins University, Baltimore, MD, USA;6. University of Sydney Business School, University of Sydney, Sydney, New South Wales, Australia;7. Institute of Business Research, University of Economics, Ho Chi Minh City, Vietnam |
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| Abstract: | We examine how liquidity affects cryptocurrency market efficiency and study commonalities in anomaly performance in cryptocurrency markets. Based on the unique features of cryptocurrencies, we build a model with anonymous traders valuing cryptocurrencies as payments for goods and investment assets, and find that decreases in funding liquidity translate into lower asset liquidity in the cryptocurrency market. Empirically, we observe that many widely recognized stock market anomalies also exist in the cryptocurrency market, although some have opposite long and short legs. We also find evidence that a decrease in cryptocurrency liquidity enhances anomalous returns while preventing the cryptocurrency market from achieving efficiency. |
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| Keywords: | Cryptocurrency Asset liquidity Funding liquidity Anomalies |
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