Bitcoin market route to maturity? Evidence from return fluctuations, temporal correlations and multiscaling effects

TL;DR

This study analyzes Bitcoin's market maturation by examining return fluctuations, correlations, and multiscaling effects from 2012 to 2018, showing signs of approaching features of mature financial markets.

Contribution

It provides empirical evidence that Bitcoin's statistical properties evolve towards those of mature markets, highlighting its potential as a regular financial market.

Findings

Statistical indicators approach mature market features before April 2018

Early trading affected by irregularities, but stabilizes over time

Bitcoin shows potential to become an alternative to Forex

Abstract

Based on 1-minute price changes recorded since year 2012, the fluctuation properties of the rapidly-emerging Bitcoin (BTC) market are assessed over chosen sub-periods, in terms of return distributions, volatility autocorrelation, Hurst exponents and multiscaling effects. The findings are compared to the stylized facts of mature world markets. While early trading was affected by system-specific irregularities, it is found that over the months preceding Apr 2018 all these statistical indicators approach the features hallmarking maturity. This can be taken as an indication that the Bitcoin market, and possibly other cryptocurrencies, carry concrete potential of imminently becoming a regular market, alternative to the foreign exchange (Forex). Since high-frequency price data are available since the beginning of trading, the Bitcoin offers a unique window into the statistical characteristics of a market maturation trajectory.