We investigate the effects of the recent financial turbulence of 2020 on the market of cryptocurrencies taking into account the hourly price and volume of transactions from December 2019 to April 2020. The data were subdivided into time frames and analyzed the directed network generated by the estimation of the multivariate transfer entropy. The approach followed here is based on a greedy algorithm and multiple hypothesis testing. Then, we explored the clustering coefficient and the degree distributions of nodes for each subperiod. It is found the clustering coefficient increases dramatically in March and coincides with the most severe fall of the recent worldwide stock markets crash. Further, the log-likelihood in all cases bent over a power law distribution, with a higher estimated power during the period of major financial contraction. Our results suggest the financial turbulence induce a higher flow of information on the cryptocurrency market in the sense of a higher clustering coefficient and complexity of the network. Hence, the complex properties of the multivariate transfer entropy network may provide early warning signals of increasing systematic risk in turbulence times of the cryptocurrency markets.

We use Random Matrix Theory (RMT) and information theory to analyze the correlations and flow of information between 64,939 news from The New York Times and 40 world financial indices during 10 months along the period 2015-2016. The set of news was quantified and transformed into daily polarity time series using tools from sentiment analysis. Results from RMT shows that a common factor lead the world indices and news, and even share the same dynamics. Furthermore, the global correlation structure has found preserved when adding white noise, which indicate that correlations are not due to sample size effects. Likewise, we found a lot of information flowing from news to world indices for specific delay, being of practical interest for trading purpose. Our results suggest a deep relationship between news and world indices, and show a situation where news drive world market movements, giving a new evidence to support behavioral finance as the current economic paradigm.

We determine the number of statistically significant factors in a high dimensional predictive model of cryptocurrencies using a random matrix test. The applied predictive model is of the reduced rank regression (RRR) type; in particular, we choose a flavor that can be regarded as canonical correlation analysis (CCA). A variable selection of hourly cryptocurrencies is performed using the Symbolic estimation of Transfer Entropy (STE) measure from information theory. In simulated studies, STE shows better performance compared to the Granger causality approach when considering a nonlinear system and a linear system with many drivers. In the application to cryptocurrencies, the directed graph associated to the variable selection shows a robust pattern of predictor and response clusters, where the community detection was contrasted with the modularity approach. Also, the centralities of the network discriminate between the two main types of cryptocurrencies, i.e., coins and tokens. On the factor determination of the predictive model, the result supports retaining more factors contrary to the usual visual inspection, with the additional advantage that the subjective element is avoided. In particular, it is observed that the dynamic behavior of the number of factors is moderately anticorrelated with the dynamics of the constructed composite index of predictor and response cryptocurrencies. This finding opens up new insights for anticipating possible declines in cryptocurrency prices on exchanges. Furthermore, our study suggests the existence of specific-predictor and specific-response factors, where only a small number of currencies are predominant.