Time-varying properties of asymmetric volatility and multifractality in Bitcoin

TL;DR

This paper analyzes the time-varying asymmetric volatility and multifractal properties of Bitcoin, revealing that market efficiency correlates with reduced volatility asymmetry and that these properties change dynamically over time.

Contribution

It provides a comprehensive analysis of Bitcoin's volatility asymmetry and multifractality using rolling window methods, highlighting their time-dependent nature and relationship with market efficiency.

Findings

Bitcoin exhibits inverted volatility asymmetry that varies over time.

Market efficiency increases as volatility asymmetry weakens.

Multifractal properties and other statistical measures fluctuate over time.

Abstract

This study investigates the volatility of daily Bitcoin returns and multifractal properties of the Bitcoin market by employing the rolling window method and examines relationships between the volatility asymmetry and market efficiency. Whilst we find an inverted asymmetry in the volatility of Bitcoin, its magnitude changes over time, and recently, it has become small. This asymmetric pattern of volatility also exists in higher frequency returns. Other measurements, such as kurtosis, skewness, average, serial correlation, and multifractal degree, also change over time. Thus, we argue that properties of the Bitcoin market are mostly time dependent. We examine efficiency-related measures: the Hurst exponent, multifractal degree, and kurtosis. We find that when these measures represent that the market is more efficient, the volatility asymmetry weakens. For the recent Bitcoin market, both efficiency-related measures and the volatility asymmetry prove that the market becomes more efficient.