Is bitcoin a channel of capital inflow? Evidence from carry trade activity

Cheng, Jiameng; Dai, Yanke

doi:10.1016/j.iref.2019.12.005

Cited by 8 publications

(3 citation statements)

References 39 publications

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“…Using 143 cryptocurrency price data from 2014 to 2018, they show that cryptocurrency has an insignificant momentum effect and crosssectional momentum tends to generate negative payoffs that are mostly insignificant. Cheng and Dai (2020) show that the bitcoin price and the related capital inflow volumes of exchange pairs, with high currency conversion profit, respond significantly more positively to carry returns. Katsiampa et al (2019) demonstrate that cryptocurrency volume is influenced by past information demand flows.…”

Section: Literature Reviewmentioning

confidence: 90%

Herding in different states and terms: evidence from the cryptocurrency market

Ali

2022

J Asset Manag

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In this paper, we provide an in-depth analysis of the herding nature in the cryptocurrency market. We use the first 200 crypto coins data ranked based on market capitalization on January 1, 2020, to show the analysis. We illustrate the crypto investors' herding nature and intensity in different terms (by using daily, weekly, and monthly frequency data) and various states (high vs. low EPU states and high vs. low VIX states). We also demonstrate the magnitude of the herding effect on the next day's market returns in the cryptocurrency market.

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Section: Literature Reviewmentioning

confidence: 90%

Herding in different states and terms: evidence from the cryptocurrency market

Ali

2022

J Asset Manag

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“…To explore the abovementioned (in)efficiency assumptions, we focus our analysis on the largest cryptocurrency by market capitalization, namely, Bitcoin. As Bitcoin markets are highly integrated and, thus, Bitcoin is a universal asset globally determined [ 62 ], we decided to conduct our analysis merely based upon the prices and trading volume expressed in USD collected at a daily frequency from http://data.bitcoinity.org (e.g., [ 23 , 63 , 64 ]). The data covers a period from January 1, 2011, to August 12, 2021.…”

Section: Methodsmentioning

confidence: 99%

An analysis of investors’ behavior in Bitcoin market

2022

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As an emerging digital asset, Bitcoin has been traded for more than a decade, reaching an impressively high market capitalization and continuing to expand its volume of trading at a rapid pace. Many countries have legalized or are considering legalizing a trading platform for this asset, and a set of companies worldwide accept it as a medium of exchange. As a result of this expansion, many studies in finance literature have focused on studying the efficiency of this cryptocurrency. In line with this literature, this paper investigates, using the abnormal returns and abnormal trading volumes methodologies, the dynamics of investors’ reaction to the arrival of unexpected favorable and unfavorable information regarding the Bitcoin market in the context of the three famous hypotheses: the overreaction, the uncertain information, and the efficient market hypotheses. Overall, we find evidence confirming that the Bitcoin market tends to mature over time. More precisely, over the entire analyzed period, investors behave in accordance with the predictions of the uncertain information hypothesis when positive and negative events occur. However, splitting the timespan into sub-periods provides interesting insights. Remarkably in this respect is the fact that starting with the second sub-period, the response of investors in the Bitcoin market supports, in a moderate manner, the postulate of the efficient market hypothesis when favorable events are addressed. Moreover, our findings reveal that during the pandemic period, the efficiency of Bitcoin has increased, thus turning this stressful period into an advantage for this cryptocurrency. This improved market efficiency is also supported by the abnormal trading volume analysis.

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“…While the literature on general capital flows is vast, the prior literature regarding the interaction among BTC, home currencies, and capital flows is more limited and indirect. For example, Cheng and Dai (2020) show the potential for using BTC to facilitate CNY/USD carry trade using BTC and where this relationship strengthens during heightened PBOC restrictions on BTC. No such relationship was found for currencies with relatively unrestricted capital flows.…”

Section: Literature Reviewmentioning

confidence: 99%

Impact of Chinese Capital Outflows on Bitcoin vs. Yuan Relationships: A Multi-Period Analysis

Williams

Kochan

2022

JFI

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We examine the relationships among Bitcoin (BTC), the Chinese Yuan (CNY), and Chinese capital outflows between 2014-2021. We find that BTC returns strongly comove with CNY returns after 2018Q1, while no significant BTC/CNY relationship exists before 2018Q1. Further, the strength of the BTC/CNY relationship increases throughout 2018 to the present date. Yet, this relationship strength cannot be explained by periods of ascending BTC prices, changes in crypto mining location, nor changes in the use of BTC "mining pools". Instead, we find that the strength of the BTC/CNY relationship is strongly and directly related to Chinese capital outflows. We find no similar relationship with a "bogey" currency, the Euro, implying that the capital outflows -to- BTC/CNY relationship is unique to China and its capital outflow environment. In total, our novel results suggest that BTC is used as part of a process to move economically significant amounts of capital from mainland China.

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Is bitcoin a channel of capital inflow? Evidence from carry trade activity

Cited by 8 publications

References 39 publications

Herding in different states and terms: evidence from the cryptocurrency market

Herding in different states and terms: evidence from the cryptocurrency market

An analysis of investors’ behavior in Bitcoin market

Impact of Chinese Capital Outflows on Bitcoin vs. Yuan Relationships: A Multi-Period Analysis

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